Why the Real Threat to Canadian Exports Isn’t China but AI Compute Infrastructure

Canada’s recent efforts to reduce trade tensions with China garnered media attention. Beijing’s tables now feature canola, peas, and lobsters, and prairie farmers can finally relax. However, beneath those welcome exports, a different kind of trade imbalance—one based on servers rather than soil—is growing.

Tariffs and customs checkpoints aren’t the true threat this time. It’s hidden in Canadian code that’s on another person’s cloud.

International recognition has been bestowed upon Canada’s flourishing AI research community, especially for its groundbreaking advances in deep learning. However, that strength has subtly turned into a weakness. Because the majority of what is produced is commercialized—and computed—abroad, even though we write the algorithms, develop the talent, and finance the research.

Approximately 80% of Canadian data is stored on cloud servers owned by the United States. The U.S. CLOUD Act makes the data legally accessible even if it is physically located here. In actuality, our governments, corporations, and academic institutions lease digital power from platforms whose regulations are outside of our control.

This is more than just a privacy issue. This one is a trade.

Services and data-driven industries have been key drivers of Canada’s economic growth over the last ten years. The digital economy is estimated to be worth between $350 and $450 billion, but 85 percent of that amount is owned by foreigners. That is, before they even leave the nation, we are exporting our data, our ideas, and our digital labor.

Last fall, I visited a startup in Montreal, and one of the founders showed me their monthly cloud expenses. Over half of them went to providers with headquarters outside of Canada. In addition to the price, the note next to it that read, “No jurisdictional control,” was particularly noteworthy. I remembered that phrase.

I became aware of how much of Canada’s economic and intellectual prowess is effectively being leased at that point.

Moreover, the price is more than just symbolic.

Recent studies estimate that Canada loses about $75 billion in economic value every year as a result of data value leakage, a lack of domestic AI computing, and low patent commercialization. Only 12% of patents are owned by Canadians, and only 5% of them are ever commercialized, despite the fact that we spend more than $10 billion annually on public research.

This picture may change as a result of wise funding and procurement choices. However, policy continues to prioritize trade victories that make headlines over investments in domestic compute infrastructure. Better photo opportunities result from the tariffs. Ownership of a server does not.

On the other hand, nations like France have enacted laws mandating that vital information stay on sovereign infrastructure. National AI compute centers for SMEs have been constructed in South Korea. Canada is still debating whether to purchase or build in the interim.

We could drastically lessen our dependency on cloud providers in the United States by forming alliances with Canadian companies like Denvr, ThinkOn, and Micrologic. These businesses provide compute and cloud services under Canadian law, which makes them excellent options for maintaining command over important data flows.

None of this is anti-American. It is economically essential.

Canada could recover security and value by utilizing its own infrastructure. Local control would guarantee that our data laws are followed, that our businesses grow more quickly, and that our exports are shielded from abrupt changes in foreign policy.

For instance, Cohere, a Canadian AI company, is keeping a competitive edge internationally by training its large language models domestically, in accordance with Canadian law. This model demonstrates that innovation and sovereignty don’t have to conflict.

These and other especially creative models serve as the model for sustainable growth, based on Canadian principles and utilizing Canadian resources.

Although the government has made positive statements regarding digital sovereignty in the last year, implementation is still moving slowly. Any national AI strategy is inherently lacking in the absence of sovereign AI compute. A nation will find it difficult to influence its digital economy if it does not own its data pipelines.

Canada’s reliance on computers becomes a liability in light of the growing geopolitical complexity. Should access ever be restricted—by trade disputes, sanctions, or updated U.S. laws—Canadian companies might be shut out of their own AI processes.

Digital exports will encompass more than just the sale of software or data services in the years to come. They will consist of AI inference-as-a-service, synthetic datasets, and algorithmic infrastructure. These call for tangible computer assets that are safely stored inside Canadian borders in addition to intellectual property.

Canada can become a net exporter of digital sovereignty by making investments now.

We’ve discovered how brittle supply chains can be since the pandemic. Digitally, the same lesson holds true. Canada shouldn’t be content to be the passenger if computation is the driving force behind contemporary economies.

Let’s stop relying solely on trade dollars and tons to gauge export strength. Let’s begin by determining who is the owner of the digital tools that are now essential to our economy. Because the value is ultimately controlled by the nation that controls the computation.