Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Trump’s Tariffs: Impact on Fintech and Canada’s Digital Tax
Taxes | Nov 26, 2024
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Could Cross-border Tax Friction Spill Over Into Digital Services and Fintech?
Yesterday, President-elect Donald Trump announced a 25% tariff to be applied to all of Canada's imports into the U.S., sparking plenty of debate. So far the focus is largely on physical goods like lumber, fuel, aluminum, dairy and food products, and things like cars. But what about fintech services, and more specifically Canada's new Digital Services Tax (DST)? Could they be somehow ensnared with this new tax friction which has already ruffled feathers in Washington (and could become another discussion point for a broader trade dispute?
What’s Going On With Trump’s Tariffs?
During Trump's campaign for re-election into office, he must have mentioned tariffs a thousand times or more. He talked about applying tariffs to every country that he thought had an unfair trading relationship with America including Canada. The Canada and Trump Risk Index ranks Canada in third place behind only Mexico and China in terms of which countries are at the greatest risk of a trade policy change. As of Aug 2024, Canada reported a trade surplus with the U.S. of about $11.5 billion CAD which is the difference between how much Canada exports to the U.S. ($43.7 billion CAD) versus imports from the U.S. ($32.3 billion CAD).
See: Who Will Canada’s New 3% Digital Services Tax Impact?
Trump's tariff trade policy on imports hopes to push countries like Canada to the negotiating table by making their exports to the U.S. more expensive for American consumer buyers driving down demand. When Trump announced a 25% tariff on all Canadian imported goods, he also mentioned the flow of illegal drugs and people coming from Canada into the U.S.. Prior to that, we also all know that Trump is angry that Canada has not followed-up on its commitment to spend 2% of GDP on defence per it's NATO member agreement. So in Trump's mind, cross-border trade needs a new deal with all countries including Canada.
Canada’s Digital Services Tax Complicates
Canada is now rolling out a unilateral 3% DST aimed at large tech companies like google, Amazon, and Facebook who generate more than $20 million CAD in revenue in Canada. The goal is to make these tech giants pay their fair share of taxes and is quite a shift in Canada's approach to taxing digital economies, and has caused a lot of controversy in Canada and aboard.
Not everyone agrees. The U.S. government sees the DST as unfairly targeting American companies. Earlier this year, the U.S. made a formal complaint under the USMCA trade agreement. If those talks fail, the U.S. could retaliate with their own tax which could get tricky for some larger Canadian fintech companies.
Could Fintech Get Caught in the Crossfire?
On the surface it seems fintech is safe given that DST is aimed at tech giants and tariffs traditionally focus on physical goods. But trade disputes have a weird way of escalating and if Trump decides to take a stronger stance on Canadian digital tax policies, fintech firms operating in the U.S. could feel the heat.
See: Canada’s Rising Tax Burden and Fintech Opportunities
Take Nuvei for example, a Montreal payment tech company that processes transactions for U.S. businesses. Nuvei reported a total revenue of $357.6 million in the third quarter of 2024 (17% increase year over year). While the U.S. revenue figures aren't specifically disclosed, Nuvei has significant operations and client base down South, suggesting that its revenue from U.S. markets would likely exceed $20 million annually. Or take Wealthsimple who recently expanded into the U.S. and services clients investment tools through its digital platform.
Both companies rely on trouble free cross-border operations to thrive. If the U.S. (or Canada) introduces new restrictions or taxes on digital services, it could make operating harder and more expensive.
Why It Matters
Being a neighbour to one of the most lucrative markets in the world has been a big part of Canada's success. But trade tensions can rise and fintech companies need to keep a close watch on trade developments (i.e., tariffs, DST etc) between the U.S. and Canada, and be prepared for new challenges and opportunities that may arise.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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