Ask HN: Do the tarrifs impact software/SaaS? If so, how? | Hacker News Reader

Ask HN: Do the tarrifs impact software/SaaS? If so, how?

34 pointsxeckr47 comments

Will it be more difficult to sell software or SaaS across the border between Canada and the US?

Tariffs on physical goods can be enforced during physical movement, e.g. a shipment crossing a border. Cross-border taxation of digital services is more complex. Canada introduced a unilateral DST (Digital Services Tax) in 2024, which the US is challenging under USMCA, https://www.canada.ca/en/services/taxes/excise-taxes-duties-...

This article claims that digital services are not subject to direct US tariffs, https://www.codemastersinc.com/post/impact-of-u-s-tariffs-on...

> DIGITAL SERVICES: While traditional industries face direct tariff impacts, digital services are also encountering challenges. Many Canadian tech firms provide software, consulting, and cloud-based solutions to U.S. clients. The uncertainty surrounding trade relations has led some American companies to reconsider long-term contracts with Canadian providers. Additionally, potential retaliatory measures from Canada could further complicate cross-border data exchange and intellectual property regulations. Despite these concerns, digital businesses may still have an advantage due to their ability to operate remotely and pivot towards new markets with relative ease.

>Will it be more difficult to sell software or SaaS across the border between Canada and the US?

That's one intended outcome.

OTOH, people in both countries may be financially hosed bad enough, that way more people will never be able to afford things other than bare necessities for the rest of their lives anyway.

O yes fearmongering always helps. Back under your bridge troll.

So exactly how is it a good thing to add costs to everything you buy?

But it's true. This doesn't affect winning founders on here.

Sudden tariff on stable trade agreement that has been tweaked to ensure both side won is not fear mongering.

Fear mongering is what Trump does to Americans: take out Oil, the thing that Americans have never ending hunger for because US infra and public transport suck ass, then the trade between US and Canada is on par.

Fear mongering is 19kg of fentanyl (or less than 1% of US fentanyl) moving from Canada to US while fentanyl by and large is US problem.

Wow, the doom is off the charts here.

Just to inject some sanity into this discussion, these tariffs would not even bring the US to the level of some higher-tariff countries such as the notoriously impoverished United Kingdom or South Korea. 2022 tariff revenue was about 100B and the current Trump tariffs as of today stand around 90B/year depending who you ask, so this takes us to, very roughly, a weighted mean of 2.8%.

Tariff rate, applied, weighted mean, all products (%): https://data.worldbank.org/indicator/TM.TAX.MRCH.WM.AR.ZS?ty...

Some countries for reference:

India: 11.5%

South Korea: 8.6%

Mexico: 4.8%

China: 3.1%

UK: 3.1%

Israel: 2.8%

Norway: 2.3%

New Zealand: 1.7%

US: 1.5%

Canada: 1.4%

EU: 1.3%

Australia: 1.0%

… I mean, that’s really hardly the point. “Hey, car industry, it’s totally fine _in aggregate_, so you really shouldn’t be complaining about collapsing”.

High tariff countries have economies configured around those tariffs. You can’t do that overnight (as the UK is discovering post-Brexit).

Are you aware that the US did this before (weighted mean tariffs >doubled in Trump’s first term) and it worked well enough that the Biden administration kept the tariffs and even increased some?

Also, comparing this to Brexit is absurd. Even putting aside the minor difference between Brexit and tariff changes, let’s compare a small island completely dependent on its neighbors to the US. They could not be more different! UK exports/imports as a percentage of GDP are double to triple the US.

> Trump tariffs as of today stand around 90B/year

Of course total revenue will decrease. Possibly very significantly so only a fraction of that estimated will be collected.

> a weighted mean of 2.8%.

Can you explain where are you getting that? I'm not saying it's false but ~45% of all use imports come from China, Canada and Mexico. If they are all taxes at 10%/25% the mean would be significantly above 2.8%?

Are you aware that the US did this before (weighted mean tariffs >doubled in Trump’s first term) and it worked well enough that the Biden administration kept the tariffs and even increased some?

You may want to take a look at a graph of US imports by year or tariff revenue by year to see your “very significant” decrease in revenue (hint: it kept going up…) I don’t claim that it is entirely independent of tariff rates forever, but it is certainly nowhere near as dependent as people imagine.

>Can you explain where are you getting that?

Sure, there are various organizations that study US tax policy and they generally publish estimates of revenue generated by a proposed tariff. I took a look at a few and found estimates around 90-100B first year. The reason that it’s not simple to calculate these tariffs is because tariff law is complex and real world behavior shifts. With the last Trump tariffs there was a huge shift out of China for several industries. Companies also lie about the value of things: https://www.federalreserve.gov/econres/notes/feds-notes/did-...

> Are you aware that the US did this before

No because it wasn't even remotely the same. In 2022 the average tariff on Chinese imports was 2.86%, 0.01% on Mexican goods and 0.12% on Canadian goods.

Besides that the first term tariffs were targeted and not applied universally to all imports. That "great/fantastic deal"(USMCA) that Trump "negotiated" back in his first term kept most trade with Mexico and Canada more or less tariff free.

TBH it's hard to tell if you're being purposefully obtuse or not...

> The reason that it’s not simple to calculate

Yes and while I very well might be wrong I just don't see how is the 2.8% figure arithmetically possible.

e.g. https://www.fitchratings.com/research/structured-finance/eff...

had different calculations (of course it assumes 60% on China and 10% on all other countries besides Mexico/Canada so it would be well below 21% but not 2.8% either).

>it wasn't even remotely the same

I think everyone can agree that in both 2018 and 2025: 1) Donald Trump announced sweeping tariffs on major trade partners - among which China, Mexico and Canada; 2) most media predicted a large-scale disaster; 3) large parts of the tariffs were later cancelled entirely, delayed, or scaled back.

I'm not sure what part of that "isn't even remotely the same." You highlight the low average tariff rates by country despite the (large) first Trump tariffs. This is _exactly_ my point: when you account for all exemptions, changes, agreements, rerouting of trade etc, the marquee double-digit numbers shrink dramatically.

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As for the exact number, obviously it is impossible to know, and there are many ways to measure it. It's not uncommon for two estimates of tariff revenue, both calculated in honest ways, to be widely at odds. This is one reason why I qualified my numbers as "very rough", but I did lay out my reasoning above. To make it simple: most groups (CRFB, Tax Foundation, etc) estimated the tariffs we were discussing (China +10, Canada/Mexico +25) to sit - very roughly - at 100B of revenue raised plus or minus a few tens of billions. Current US tariff revenue is approximately 100B. So, in other words, we're talking about an approximate doubling of mean tariffs, which stand at around 1.5-2% today depending on who you ask and how it is measured.

Uh... Ya just like GDP going up is good for the nation ignoring GDP hides distribution and wealth inequality goes up unchecked.

Average sucks.

Of course they will affect Software or SAAS. We don't know how yet since retaliation tariffs have not all been finalised/levied yet. Remember tariffs are not just unilateral from the US.

If true, this could be a great opportunity to buy Shopify at a discount; however, I haven’t found any evidence that the tariffs apply to services.

Not any kind of expert, but from my research, Article 19.3 of the USMCA says that tariffs can't be imposed on digital products:

1. No Party shall impose customs duties, fees, or other charges on or in connection with the importation or exportation of digital products transmitted electronically, between a person of one Party and a person of another Party.

The full chapter on digital trade: https://ustr.gov/sites/default/files/files/agreements/FTA/US...

You act as if this administration is concerned with silly things like laws or that either the courts or Congress is going to stop him.

This isn’t hyperbole. Right now, Oracle and Akamai is illegally supporting TikTok even though a bipartisan law was passed and it was upheld by the conservative court because Trump said it was okay.

The USMCA is irrelevant. Almost everything hit by the tariffs is not allowed under USMCA. Trump has claimed an "emergency" to bypass Congress and the USMCA.

USMCA is defacto null and void.

What about contracting? Hourly rates? Employment?

Services are much less likely to be impacted

Genuine question!

Probably but with how weak the Canadian dollar is you can probably just eat the cost (assuming you're Canadian selling to the US).

This is not how tariffs work - the US company is responsible for the tariff, not the Canadian company.

Well usually it's levied at the border for physical goods so the importing company (usually not the end consumer for consumer goods) eats the cost (or prices it in/passes it to the consumer).

You're right though, with digital goods it's ambiguous. If the company has a US entity is that the importer? That's the scenario that popped into my (somewhat tired) head. Probably because Canada has been trying to impose taxes on US tech companies with a similar argument.

If you buy a good online in a separate country, where is the transaction made?

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