In the weeks leading up to United States President Donald Trump’s imposition of so-called “reciprocal” tariffs on much of the world, American tech and pharmaceutical giants lobbied their government to take action against Canada’s digital services tax and drug-pricing board.

Trump announced plans on April 2 to impose what he called “reciprocal” tariffs on goods from most other countries, with a baseline of at least 10 per cent. The supposed retaliation was in many cases not due to other countries’ tariffs at all, but rather internal taxation systems, food and safety regulations, or simple trade imbalances in which the U.S. purchased more from a country than it sold.

The measures were foreshadowed in a Jan. 24 memo from the Office of the United States Trade Representative, announcing a review of “foreign trade practices to account for those practices which may be unfair to the United States, including those practices that may be unreasonable or discriminatory and that may burden or restrict United States commerce.”

In a public comment period from Feb. 20-March 11, the office received more than 760 submissions, including from industry associations from the tech and pharmaceutical sectors that outlined grievances with Canada.

PMPRB in pharma spotlight

The Pharmaceutical Research and Manufacturers of America (PhRMA)—which counts Pfizer, Johnson & Johnson, Bayer, and Merck among its members—took aim at Canada’s Patented Medicine Prices Review Board (PMPRB) in its March 11 submission, among other concerns with the country.

The PMPRB reports on pricing trends in the pharmaceutical industry, and sets maximum prices within Canada for new patented medicines. PhRMA argued that the second function “systematically devalues U.S. medicines” through its practice of examining the prices of drugs across a “basket” of 11 countries: Australia, Belgium, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, and the United Kingdom. 

That “deeply flawed approach,” the submission said, is compounded by PMPRB’s removal of the U.S. and Switzerland from its basket in 2022, and the addition of “six countries with lower drug prices and more onerous price controls.” PhRMA made similar complaints against counterpart agencies in Australia, Japan, and the European Union, of which some member countries are included in PMPRB’s basket of comparator nations.

In its submission, PhRMA said that Canada should reform the PMPRB’s role to “reflect the spirit of the” Canada-United States-Mexico Agreement (CUSMA) principles included in Article 29.6. 

That article covers the importance of “pharmaceutical products and medical devices,” and to recognize the “value of pharmaceutical products and medical devices through the operation of competitive markets,” or adopting procedures that “appropriately value the objectively demonstrated therapeutic significance” of those products.

Meanwhile, the Canadian Pharmaceutical Manufacturers and Exporters Alliance argued for tariff exemptions for “high quality, [Food and Drug Administration]-approved medicines from Canadian pharmaceutical facilities,” without which the U.S. market would “surely experience shortages, increased costs and supply chain disruption.”

C-11, C-18, Digital Services Tax targeted

The communication and technology lobby group Computer and Communications Industry Association (CCIA) attacked the effects of Canada’s Online News Act on member companies Meta and Google, in addition to criticizing the impacts of the Online Streaming Act, and the Digital Service Tax on U.S. firms.

The Online News Act compels tech entreprises to enter agreements with Canadian news publishers to pay for content posted on their platforms. Under the criteria, only Google and Meta—parent company of Facebook and Instagram—are required to pay.

The two companies took different approaches to the law. Google sought and achieved a five-year exemption from the law by agreeing to pay publishers $100-million annually. Meta banned news on its platforms in an attempt to avoid payments.

CCIA’s submission does not mention either Meta or Google by name, only noting that they are U.S. firms. In Meta’s case of banning news to avoid paying publishers, the association said “the economic effect on the supplier of withdrawing from this market segment is difficult to estimate.”

“U.S. companies face ongoing threats of potentially greater payments if current agreements are deemed insufficient,” the submission said.

The Online Streaming Act—which requires streaming content providers to fund and promote Canadian content—was also listed among examples of a “pervasive and growing phenomenon … forcing one set of market participants to subsidize the economic activities of another.”

One of two appendices added to the submission was a May 2024 paper on the impacts of the Digital Service Tax on the U.S., which concluded that the three-per-cent tax on revenues from online marketplaces, advertising, social media, and user-data services would cost American firms between $US0.9-billion ($1.29-billion) and $US2.3-billion ($3.3-billion) and between 1,200 and 3,140 full-time equivalent American jobs. 

The paper also alleged that thresholds were “gerrymandered” to target U.S. digital service providers while excluding most Canadian counterparts.

U.S. government concern over the digital service tax and the Online Streaming Act predates the Trump administration, appearing in the 2024 National Trade Estimate Report on Foreign Trade Barriers under then- president Joe Biden.

The tax reappears in U.S. Trade Representative Jamieson Greer’s 2025 report on foreign trade barriers for Canada, released on March 31, alongside existing complaints about supply management, alcohol, and restrictions on seed exports.

This year’s version also included concerns about the Online News Act, noting that the “United States continues to monitor this issue.” Greer also takes issue with Canada’s plan to achieve zero plastic waste by 2030, Quebec’s latest French language law, and apparent “separate and unequal points of access to the Alberta energy market for Montana energy producers.”

No ‘unfair trading practices’ from Canada, says business council

Canada’s government and businesses also had their say in separate submissions to Greer’s office on March 11.

The federal government’s submission, with a letterhead from the country’s embassy in Washington, D.C., argued that trade between the two countries is “fair, balanced and reciprocal.” 

“Canada is committed to promoting fair trade and countering unfair and non-reciprocal trade practices by other countries to facilitate innovation, competitiveness and prosperity in North America,” the submission said. “However, Canada’s ability to take action to combat unfair trade practices from other countries is constrained when faced with unjust and unwarranted trade measures from the United States.”

The submission also defended the digital service tax as a country-neutral levy on large firms that “earn revenues from in-scope digital services associated with Canadian users.” The government’s submission also noted that the U.S. had a trade surplus for services with Canada, and that Canadians were the top source of tourism to the United States.

The Business Council of Canada (BCC) also made a submission on March 11. BCC president and CEO Goldy Hyder said Canada does not have any “unfair trading practices” that caused harm to the U.S., and that any issues over non-reciprocal trade arrangements should be processed via the forthcoming review of CUSMA.

“In the interim, we would merely submit that the operation of the USMCA since its coming into force under President Trump has, as set out in the America First Trade Policy, achieved and maintained ‘the general level of reciprocal and mutually advantageous concessions with respect to free trade agreement partner countries,’” Hyder concluded.

sjeffery@hilltimes.com

The Hill Times