Donald Trump's victory in the 2024 U.S. presidential election has led to significant political and economic changes. With the Republican Party securing control of the House, Senate, and presidency, and as of today, the Trump administration is threatening an executive order of 25% tariff on imported goods, impacting various sectors, including Canada's tech industry. This development raises concerns for Software companies and Canadian consumers of technology.

Key Developments in U.S.-Canada Trade Relations

CUSMA Replaces NAFTA

In 2020, the Canada-United States-Mexico Agreement (CUSMA) replaced NAFTA, maintaining Canada's preferential access to U.S. and Mexican markets. This was advantageous for tech, assisting smoother participation in North American trade. Between 2020 and 2023, Canadian SME exports to the U.S. and Mexico experienced significant growth, reinforcing Canada's role in regional trade.

Canada’s Digital Services Tax (DST)

In June 2024, Canada introduced a 3% Digital Services Tax (DST) targeting large digital companies—primarily American firms—generating substantial revenues in Canada without what the government considers a fair tax contribution. The tax applies to companies with global revenues exceeding CA$750 million and Canadian digital services revenues over CA$20 million. Initial payments are due by June 30, 2025.

The U.S. has opposed the DST, arguing it unfairly targets American tech giants. Under CUSMA, this tax has become a contentious issue, with potential retaliatory tariffs looming.

U.S.-Canada Trade Relations Under Different Administrations

• Trump Administration (2017–2021): Characterized by trade tensions, including the renegotiation of NAFTA into CUSMA and tariffs on Canadian steel and aluminum.
• Biden Administration (2021–2025): Focused on rebuilding bilateral ties, resolving trade disputes, and emphasizing technology and environmental collaboration.
• Trump Administration (2025–Present): The newly imposed 25% tariff on Canadian imports is justified by concerns over illegal immigration and drug trafficking.

In response, Canadian Politicians’s responses have ranged from ambivalent to combative, with Ontario Premier Doug Ford taking retaliatory measures, including canceling a contract with Starlink and banning American firms from provincial contracts, escalating economic tensions between the two nations.

‍Implications for the Software Industry

‍The combination of newly imposed U.S. tariffs and Canada’s DST creates an uncertain future for Software buyers..

• Increased Costs: A 25% U.S. tariff would make imported software and tech services more expensive for Canadian businesses.
• Retaliatory Measures: Canada may introduce counter-tariffs, further complicating cross-border business operations.
• DST Compliance: Companies will need robust tracking systems to remit retroactive DST payments dating back to 2022.

Future Outlook‍

With rapid changes, rising costs and strained trade relations, Canadian businesses face new challenges and uncertainty. For software purchasers, local options will become more appealing and will offer more  stability as things become more uncertain. Monitoring policy changes, diversifying markets, and leveraging CUSMA’s trade dispute mechanisms will be crucial.

The coming months will be important in shaping the future of Canada-U.S. tech collaboration, and for Software buyers, every decision carries more weight than before.

In this evolving landscape, Q-Fi offers a reliable and cost-effective alternative for Canadian businesses looking to navigate these and other challenges. As a locally developed software solution, Q-Fi eliminates concerns about cross-border tariffs while ensuring compliance with Canadian regulations, including DST. By providing a stable, scalable, and high-quality platform, Q-Fi helps businesses avoid uncertainty and focus on what truly matters—delivering impactful research and insights.