Will Tariffs Impact Your Digital Life?

Tariffs and taxes are ancient ideas. From buying Minecraft on the app store to filming The Last of Us in Alberta, how will future US Tariffs impact all the things that cross borders electronically?

You know I’m deeply into it when I go and start reading source documents.

I’ve been writing some pretty dire notes on the pending US Tariffs as a kind of straw that breaks the back of the Canadian film and TV industry. This research has caused me to have to completely change my mind on what I expect to happen with regard to Tariffs on all things Digital.

The current main document overseeing trade between the US and Canada is the USMCA agreement that Donald Trump himself negotiated and agreed to with much fanfare.

Does that mean he will stand by and respect it now?

No!

That is definitely not his style. And in fairness to him, that’s not how life works. Facts change. What was right yesterday may not be right tomorrow.

But, there are some practical things that don’t change.

So, though we in the entertainment industries in Canada, and all digital consumers wait in a kind of digital purgatory, there’s solid reason to believe that nothing will happen in the world of social media, digital trade, film, TV, music, and the arts.

Why?

The United States–Mexico–Canada Agreement (USMCA) explicitly prohibits the imposition of customs duties on digital products distributed electronically, such as television shows, music, ebooks, software, apps, video, social media… basically all the modern digital world stuff. This is outlined in Article 19.3 of the agreement, which states:

"No Party shall impose customs duties, fees, or other charges on or in connection with the importation or exportation of digital products transmitted electronically."

This provision ensures that digital products like TV shows, e-books, music, and software are exempt from customs duties when transmitted across borders among the USMCA member countries. The full text of Chapter 19, which covers Digital Trade, can be found on the Office of the United States Trade Representative's website:

USMCA Chapter 19: Digital Trade

Additionally, the International Trade Administration highlights that the Digital Trade chapter contains the strongest provisions of any international agreement, prohibiting customs duties on products distributed electronically. More information is available here:

USMCA New Chapters - Digital Trade

These provisions collectively ensure that digital products, including television shows, are not subject to customs duties under the USMCA framework.

But maybe even more, there are real practical limits to this.

Here’s The Man In Black, Johnny Cash, explaining in song how Tariffs work and what they can be applied to.

Taxes and tariffs are as old as civilization itself—older than the Bible, older than coinage, older than most of what we call law. But they were built for the tangible, the weighable, the countable—not for the digital ether where a TV show, a software update, or a streaming subscription crosses borders in a nanosecond, leaving no crates to inspect, no ports for navies to blockade, no customs officer to stamp its passage.

For Trump to impose digital tariffs would be an act of bombastic, far-reaching impracticality, the bureaucratic equivalent of trying to tax the wind. No modern trade agreement, including the USMCA, has ever allowed tariffs on digital goods, and attempting to do so would unravel decades of international consensus on free-flowing digital trade. The unintended consequences would be absurdly chaotic: would Americans be taxed for buying Minecraft on the App Store if the game's servers are in Canada? Would streaming Schitt’s Creek suddenly trigger an import fee? Could a production like This Is Us—filmed in Alberta—face a content tariff before it airs on NBC? The sheer complexity of policing digital tariffs would require a draconian expansion of customs enforcement into cyberspace, creating an enforcement nightmare that would stall tech industries, anger media conglomerates, and leave policymakers tangled in the very internet cables they’d be trying to tax.

The recent announcement of a 25% tariff on imports from Canada by President Trump has raised concerns across various industries. However, it's important to understand how these tariffs apply, especially concerning intellectual property (IP) assets like television shows.

So, I think I was probably wrong in my earlier concerns. Given the current trade frameworks and historical application of tariffs, it is improbable that the 25% tariff will apply to intellectual property assets such as television shows, especially when distributed digitally.his understanding aligns with existing trade agreements and expert analyses, suggesting that the primary impact of the tariffs will be on physical goods crossing the border.

Now the larger issue in the digital world is exchange rates.

The Canadian dollar dipped below 69 cents USD today.

That makes American goods more expensive.

But it means that from a US perspective, Canadian goods are on sale at a steep discount.

This is the joy and genius of floating currencies. They create a market to absorb the impact of changing economics between countries balancing challenges with opportunities, and stability with change.

SIDEBAR

There’s an interesting sidebar to this. You don’t have to read Section 19 of the USMCA on Digital tariffs and taxes to understand that, whatever the spirit or good intention, the Canadian government’s position on charging social media companies when people share Canadian digital products is clearly and distantly off-side.

The Canadian government's Online News Act (Bill C-18) mandates that digital platforms like Meta and Google compensate Canadian news publishers for content shared on their platforms. This approach is clearly in conflict with the principles outlined in the Digital Section of the United States–Mexico–Canada Agreement (USMCA), which prohibits customs duties on digital products distributed electronically. Requiring payments for sharing news links imposes a form of tariff on digital content, potentially hindering the free flow of information and setting a concerning precedent for digital trade. It’s also painful and impractical and is hurting Canada. In response to the legislation, Meta has blocked news content on its platforms in Canada, underscoring the challenges and unintended consequences of such regulatory measures.