Last year, Canada introduced a Digital Services Tax targeting major U.S. technology companies operating domestically, a move that drew sharp criticism from then-President Donald Trump, who described it as an “egregious” attack on the United States. The backlash from Washington ultimately led Ottawa to repeal the tax without securing any concessions in return. This episode underscored ongoing tensions as Canada seeks to regulate U.S. technology firms while navigating the political and economic influence those companies wield.
Canada’s reliance on American Big Tech is significant, with firms like Amazon, Microsoft, and Google dominating the nation’s cloud services sector—controlling approximately 85 percent of Canada’s public cloud market. Similarly, across the Atlantic, Europe faces comparable challenges. The former European Central Bank president Mario Draghi noted in a recent report that U.S. dominance over Europe’s cloud computing market poses strategic risks and results in a significant transfer of economic value out of the bloc. European governments, like Canada, have struggled to reduce dependence on these firms amid threats of retaliatory measures, including tariffs and export controls, from the U.S. government.
In this context, the upcoming Canada-EU Summit held in Montreal on October 29 and 30 offers an opportunity to pursue collaborative strategies aimed at mitigating technological dependence. European Commission President Ursula von der Leyen has pledged to establish a transatlantic technology alliance focused on shared priorities such as artificial intelligence (AI), quantum computing, cybersecurity, and economic security. This initiative aligns with calls from figures like former Bank of England Governor Mark Carney, who advocated for middle powers to unite in response to what he described as a “rupture in the world order.”
While the announcement of this alliance marks a positive step, the specifics of its technology agenda remain to be detailed. Experts have identified joint enforcement of competition laws as a critical starting point to counter the market dominance of U.S. tech giants. Enhanced cooperation between Canadian and European regulators could make markets more contestable and encourage the entry of alternative providers.
Additionally, there is potential for the alliance to coordinate investments and procurement policies fostering the development of digital infrastructure less reliant on American and Chinese companies. Recognizing Canada as an associated third country within the EU’s cloud sovereignty framework could facilitate Canadian cloud providers’ access to sensitive government contracts in Europe, which are currently inaccessible to the largest U.S. firms due to security restrictions.
Moreover, the partnership could leverage the combined purchasing power of Canada and the EU as a tool to resist coercive actions, including those previously exercised by the U.S. government in reaction to digital regulations or taxes. Incorporating Canada into the EU’s anti-coercion regulations would create a joint platform to deter such pressures.
As dependency on U.S. Big Tech deepens, the emerging Canada-EU tech alliance represents a strategic attempt to counterbalance that influence, defend economic sovereignty, and promote more diversified and resilient digital ecosystems. The success of the alliance will depend on the capacity of both parties to address anti-competitive practices, support alternative technologies, and resist external coercion while safeguarding their shared interests.