With the latest 35 per cent

tariff threat

from United States President

Donald Trump

, the national

trade discussion

and news headlines are, understandably, fixated once again on tariffs on goods and what to do about them.

As a relatively small, open economy, Canada relies heavily on trade — especially trade with our neighbour and the world’s largest market — to sustain living standards. But focusing only on physical goods risks missing a major opportunity. Canada’s fastest-growing export category is not oil or autos. It is digitally delivered services.

These services are delivered remotely or sold via digital platforms. Digital services do not move across physical borders. They move through code, platforms and cross-border data flows. Over the past 20 years, they have grown nearly four times faster than Canada’s other exports, yet they remain largely absent from the national trade conversation.

A new

discussion paper

from the Asia Pacific Foundation of Canada points out that digital service exports now account for almost two-thirds of Canada’s commercial services exports. Growth is strongest in sectors such as software, engineering, audiovisual services and IT consulting.

Digital services are also the fastest-growing part of global trade. Since 2005, they have grown more than three times faster than goods trade globally. Their share of total world services exports has climbed to more than 50 per cent from 30 per cent.

The fastest-growing importers of digital services include Indonesia, Vietnam, Chile, Peru, the Philippines and India, where demand for digital solutions is growing rapidly across sectors such as information technology, fintech and e-commerce. Many fast-growth markets now import more digital services than traditional goods.

Cloud-based collaboration, seamless and instant language translation, and digital platforms are accelerating this shift. New

artificial intelligence

(AI) developments further expand the menu of what can be traded globally.

Canada has the foundations in place to seize this opportunity. This country has world-class AI researchers, firms that are digitally enabled and diaspora connections to emerging digital markets. Canadians are also among the top global users of generative AI tools.

The federal government now has a dedicated minister for AI and digital innovation. Canadian trade policymakers have been leaders in including digital provisions in trade agreements. The Canada-U.S.-Mexico Agreement (

CUSMA

) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (

CPTPP

) already contain modern digital trade rules, and Canada has just announced a new digital trade agreement to be negotiated alongside the Canada-European Union Comprehensive Economic and Trade Agreement (

CETA

).

But despite all these tools, Canada is punching far below its weight. Our digital services exports have rapidly grown, but our global market share remains below three per cent. That is well behind the United Kingdom, France and the Netherlands.

Ottawa needs to reframe Canada’s trade discussion for the digital and AI era. Digital trade is growing quickly, faces different restrictions than physical trade and relies less on geography, and is aligned with Canada’s relative strengths.

Canada should adopt a clear national goal: double its share of global digital services exports by 2030 and ensure that at least half go to markets beyond North America. This target would focus national attention and provide a benchmark for progress in a fast-growing part of the global economy. It would also help identify and address the barriers that digital exporters face.

Canada already offers support through trade commissioners and export financing, but these efforts are rarely co-ordinated around a shared objective. Moreover, those responsible for AI and digital innovation do not co-ordinate with those responsible for trade. A clear target would connect these discussions.

Canadian firms in traditional sectors such as manufacturing, agri-food and mining could also benefit from embedding more digital services into their exports. But the data on digital services inputs shows that most are not adopting these inputs in significant ways. Strengthening digital services trade would support these sectors by making their offerings more competitive and more resilient amid the trade crisis.

Policymakers should treat digital trade as core to the country’s economic strategy. Canada has the tools it needs to capitalize on the new trade possibilities that have already emerged.

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An increased focus on digital trade also helps derisk Canada’s overall trade portfolio. It expands both the types of trade and markets for that trade, making Canada’s economy more resilient in the face of tariff whiplash under Trump 2.0.

Kati Suominen is the founder and chief executive of Nextrade Group, and Danielle Goldfarb is a distinguished fellow at the Asia Pacific Foundation of Canada.