The cancellation of the tax was originally a concession to the U.S., with Ottawa promising to protect Canadian content through government funding. But those dollars would be taxpayer money, and their future uncertain depending on budgetary needs.

By Sheila Copps
First published in The Hill Times on August 31, 2026.

OTTAWA—Culture is on the front burner for the first time in modern trade negotiations.

In the aftermath of the breakdown of talks between Canada and the United States, Prime Minister Mark Carney cited attacks on the French language as a major reason for why the country walked away from the deal.

U.S. President Donald Trump attacked the prime minister’s claim with a bizarre statement on his social media platform claiming he loves French Canadians: “This lie was made up by a weak and ineffective prime minister in an attempt to gain political support, which he has totally lost, from the people of Quebec.”

Trump says he has no problem with people speaking French, but his negotiators signalled that Canada’s requirement for bilingual labelling was an irritant. The Canadian government also rejected an American demand to eliminate streaming requirements that make French and Quebec cultural content easily discoverable. Such requirements currently exist in the streaming sector.

Since the breakdown of talks, the U.S. government—through an interview provided by its Trade Representative Jamieson Greer to CBC News on Aug. 26—has indicated that discoverability was not a “red line.” In an X post on Aug. 27, Canada-U.S. Trade Minister Dominic LeBlanc said, “Canada is pleased that the United States is now reversing its positions regarding discoverability,” and that his government is looking forward to other “contructive clarifications” on American positions on proposed free trade terms.

Carney’s decision to leave the negotiating table on Aug. 21, and promise dollar-for-dollar counter-tariffs has been widely applauded by Canadians, but his strong defence of the French culture came as a surprise.

It also spawned new demands on the culture front from the Bloc Québécois. In the lead up to the current round of negotiations, the Liberal government eliminated the implementation of a digital services tax.

The proposed tax was seen as an irritant to the Americans. The three-per-cent levy was cancelled in the 11th hour before its implementation, as the prime minister said it would not be worth implementing a tax that may be abolished in the upcoming trade discussions. He also defended cancelling the tax as a way of protecting affordability for families that are struggling with rising household costs.

At the time, Carney announced the tax revenue would be replaced by an annual direct investment of $600-million for Canadian content.

With the collapse of negotiations, Bloc Québécois leader Yves-François Blanchet is asking Carney to implement the digital tax that was originally introduced by the previous Liberal government. Blanchet says the replacement of the tax by a multi-million-dollar government investment is shifting financial responsibility from entertainment multinationals to taxpayers.

He also says the cancellation of the tax threatens the survival of French-language cultural production and Quebec jobs.

In outlining the government’s counter-tariff strategy, Industry minister Mélanie Joly specifically cited risks to the cultural sector, which she said employs 900,000 people across Canada.

Blanchet is also asking the prime minister to cancel the procurement of fighter jets from the U.S. as part of the Canadian response.

British Columbia Premier David Eby publicly reinforced the Bloc’s request to cancel jet procurement. He said the government needs to reinforce its plan to implement retaliatory tariffs with other measures, including the power of purchasing boycotts such as the fighter jet purchase.

For Carney, it was the first time that culture was front and centre in a positive way.

When the government cancelled the implementation of the digital tax, most Canadians were happy or neutral, assuming it would limit any digital streaming cost increases.

The Conservative Party had opposed the digital tax and lauded the cancellation.

But the move prompted major concern in the cultural sector that defends those 900,000 jobs.

The $600-million commitment by Ottawa would replace the tax, but it could also be subject to potential uncertainty as future budgets could reduce the payment.

More importantly, the change means that global web companies contribute nothing to the CRTC-mandated system that requires domestic broadcasters to pay their fair share.

Several European countries have implemented a digital services tax in amounts ranging from 1.5 to 7.5 per cent.

Carney’s call for Canadian cultural protection has awakened the sleeping cultural giant.

In the 1992 North American Free Trade Agreement, Canada vigorously defended a cultural exemption. The government of then-Progressive Conservative prime minister Brian Mulroney insisted on a cultural carveout.

The second free trade deal, the Canada-United States-Mexico Agreement (CUSMA) Agreement—signed in 2018 and revised in 2019—involved the same exemption.

In the more recent CUSMA negotiations, culture was not a major issue in the discussion. The decision to cancel the digital tax preceded the talks, leaving the impression that the Canadian government would be willing to sacrifice culture in favour of a trade agreement.

Carney insists that one of the main reasons for the talk’s breakdown was Canada’s vow to protect French language and culture.

Digital tax implementation would strengthen his position.

Sheila Copps is a former Jean Chrétien-era cabinet minister and a former deputy prime minister. Follow her on Twitter at @Sheila_Copps.

Trump will definitely be pushing hard for dairy concessions but Carney cannot afford to cave on supply management.

By Sheila Copps
First published in The Hill Times on July 7, 2025.

To cave or not to cave, that is the question.

According to Karoline Leavitt, the White House’s press secretary, Canada caved.

According to Prime Minister Mark Carney, his administration cancelled a tax initiative of the previous government in order to get trade negotiations back on track.

Carney knew there would not be too much push back in Canada since the tax was opposed by Conservatives and poorly understood by Canadians.

The trade-off of continuing negotiations in lieu of taxing American high-tech companies in the short term seems like a fairly easy call.

Many workers in the steel, aluminum, and auto industries are already seeing their jobs affected by American tariffs, so the sooner an agreement can be reached between Canada and the United States, the better.

But Leavitt’s crowing from the podium did allow Conservative Party Leader Pierre Poilievre to claim that the government has its elbows down in the fight for Canadian jobs.

To be fair, Finance Minister François-Philippe Champagne’s announcement of the cancellation of the Digital Services Tax was met with a major yawn by the public.

But those in the know understand that the tax mimicked a similar levy already imposed by the European Union, with countries like France and Spain already imposing a three-per-cent tax on companies providing certain digital services. In France, the tax is levied on firms with global revenues in excess of 750-million euros and in excess of revenues of 25-million in France.

Turkey has a DST more than double that of EU countries, with the levy weighing in at 7.5 per cent.

Canada has been a leader in finding ways to fund local content via the tax system, and it was fully expected in the streaming world that the digital tax passed last year was untouchable. It was not widely debated and as late as last week, Champagne confirmed the tax would be going ahead.

That was then and this is now. Carney obviously took a look at the big picture and decided he could afford to cancel the tax with little political punishment.

But there are other elements facing much more opposition if Carney plans to meet the deadline of July 21 for a trade agreement with the U.S. That was the timeline tentatively established by the American president and the Canadian prime minister at their G7 meeting in Kananaskis, Alta.

Trump keeps reinforcing his government’s opposition to Canada’s supply management system in our dairy industry.

That is one issue that is widely understood and broadly supported by all political parties.

It has even been subject to the provision that no government could eliminate supply management without a parliamentary vote.

The government and all opposition parties support the Canadian supply management system that limits imports of dairy products including milk and cheese, and adds heavy tariffs to some dairy items.

In reality, the heavy fees that Trump keeps referring to have never actually been applied because no American companies have imported enough dairy products into Canada to trigger the fee.

But on every occasion, Trump keeps referring to how “nasty” Canadian negotiators are, and how he would like to see the dairy system released from any agreement on supply management.

This is one hurdle that Carney will not be able to bypass as easily as he did with the DST.

The Bloc Québécois and the Tories have already indicated their support for retaining supply management. The only party that opposes it is the People’s Party, led by Maxime Bernier, which has no seats in Parliament. In fact, it was Bernier’s opposition to supply management that cost him the Conservative Party leadership in 2017. He was leading in 12 rounds of voting against Andrew Scheer and eventually lost the Tory leadership because of the support Scheer received from dairy farmers in Quebec.

Carney is committed to the July deadline for a trade agreement, but the pursuit of a deal will definitely put supply management on the line.

And this is one area where “elbows up” is required on the Canadian side. Carney cannot afford to cave on supply management ,and Trump will definitely be pushing hard for dairy concessions.

The political damage Carney would suffer from giving up on supply management is equally as important as the fight for steel, autos, and aluminum.

If Leavitt was crowing about Canada caving on the digital tax, she would be absolutely ecstatic if supply management were sacrificed to the larger trade agenda.

Carney’s elbows up strategy has worked so far. But the stakes are getting higher.

Sheila Copps is a former Jean Chrétien-era cabinet minister and a former deputy prime minister. Follow her on Twitter at @Sheila_Copps.