TORONTO — The Trump administration’s blanket approach to imposing tariffs on Canadian products may not impact firms that ship code as much as companies selling cars and cheese across the border, trade experts have said.

Washington has made international promises not to tariff software. The U.S. is part of a World Trade Organization deal under which countries agreed not to put customs duties on electronic transmissions through March 2026. The United States-Mexico-Canada Agreement (USMCA), signed during Trump’s first term, also includes a carve out for digital goods. 

It would be “very problematic based on current international rules” for the U.S. to tariff software, said Orlando Silva, a partner in the international trade practice at law firm Cassels, a law firm. “It would be odd for them to do that.”

Tariffs also typically target goods, not services. “They do not apply on intangible property, such as software or technology licenses, or cross-border services including cloud-based services,” lawyers at Blakes wrote in a bulletin ahead of Trump’s initial deadline for imposing the duties.

But the question of whether software is a good or a service has “a lot of people tied up in knots,” said Rambod Behboodi, senior counsel in the international trade practice at law firm BLG. “There is no single, simple answer.” Historically, Canadian-made code crossed the border on floppy disks or CD-ROMs. Those were clearly goods, so when software was first sold online it was initially considered one too. 

Many tech companies have since shifted to selling ongoing access to programs in the cloud rather than one-time licenses for downloaded code. “If you have the same software that is subject to ongoing subscription payments, then it’s more of a service,” said Behboodi. That would mean no tariffs, since tariffs don’t typically cover services.

Practically, the tariff decision is in the hands of U.S. consumers and companies buying Canadian-made software. If the client considers the program it’s purchasing to be a good, they’ll have to pay the 25 per cent levy, Behboodi said; if they think it’s a service, they won’t pay. 

In any case, U.S. Customs and Border Protection (CBP) will face significant challenges trying to impose the tariff on American customers downloading Canadian software because they don’t cross the border the same way as auto parts or cosmetics. “I don’t know how they track that, or how they impose duties on it,” said Silva. 

Behboodi said Canadian firms renewing contracts with U.S. clients should clarify in the paperwork whether they’re selling a good or a service, and which side will ultimately foot the tariff bill should the U.S. government impose one. 

Trade lawyers have noted that the Trump administration’s tariff order is unusually broad, covering all but a few excepted categories of Canadian imports. That’s in contrast to the Canadian retaliatory measures, which target specific U.S. exports. The U.S. approach makes it hard to definitively rule out whether an intangible product like software will be subject to the new duty.  

The Trump administration hasn’t specifically addressed the issue of slapping tariffs on sales of foreign software. The U.S. CBP did not immediately respond to a request for comment.