We Need a Digital Strategy for the Trade War

It’s weird to realize you’re watching history unfold in real time.

There’s going to be plenty of discussion about the specific details of the trade negotiation breakdown. We’ll leave that commentary to other people.

But if you take a step back, we think the story of Friday, August 21, 2026 will be another key hinge moment in the story of a fundamental trade reorientation between Canada and the United States.

From the 1980s through to about 2025, our two countries were pursuing ever deeper integration, and the free flow of goods and services across the border. Now we’re all trying to figure out what new durable terms of trade will look like between Canada and the United States.

A couple thoughts:

First, most of the conversation remains rooted in the old economy. We’re focusing on steel, aluminum, resource extraction, and automotive manufacturing. 

Where’s the internet, AI and quantum in all of this? Do we have a vision for the digital economy, which plays an integral role in every Canadian’s life? How does digital sovereignty fit into a more tense and adversarial trade relationship with the United States, when so much of our infrastructure is dominated by American big tech?

The few times that digital policy has come up in the trade negotiations, it always seems like Canada is conceding something to save automotive manufacturing or dairy. We gave up the digital services tax. We rolled back the online streaming levy. We were ready to concede on the Online News Act.

There’s no point in debating the specific merits of these policies right now (some of them weren’t great!) but if we foreclose the ability to govern digital platforms and protect Canadians from abuse and exploitation online, then we are giving up a lot. 

Second, when Prime Minister Mark Carney spoke to the media on Saturday about the breakdown in trade, he was refreshingly candid about what caused the negotiations to fail. It was a notable change of tone precisely because Carney’s government has been so tight-lipped throughout the process. Most of our information up until now has come from anonymous leaks, and random extemporaneous pronouncements from Trump. 

It’s good to hear a clear account of what happened to cause talks to break off. It’d be better to hear from the Prime Minister about what the plan is going forward. Be clear about what terms bring Canada back to the table. 

Canada is arguing that we’re a reliable trading partner — not just when it comes to the U.S. trade relationship, but in dealing with other countries too. The fastest way to win the reliability argument is to visibly be the reliable party. 

Prime Minister Carney said that our “dollar for dollar” retaliatory tariffs won’t come into effect until Tuesday, Sept. 8. Now would be a good time for the government to expand the voices around the table, and have some serious conversations about both the right retaliatory measures and our long-term strategy. 

From our perspective at the Canadian Shield Institute, one dimension that we cannot lose sight of in this whole conversation is digital sovereignty. Earlier this year we published a major series called Foundations of Digital Sovereignty where we took a deep dive into data, intellectual property, digital infrastructure, government procurement and more. 

These trade agreements are often tools that the United States uses to clip the wings of trading partners, and constrain their ability to govern. We’ve talked about how American big tech wants to undermine our ability to regulate, and keep Canada in a state of permanent digital servitude.

The ability to govern the digital realm is vitally important for our economy, for our culture, and for our democratic sovereignty. This can’t be something we trade away to get a better deal on automotive manufacturing. 

The bottom line is this: Governance is the foundation of digital sovereignty, and if we negotiate away the ability to govern the digital economy, that will be a major limitation for Canada for decades to come.