Why it Matters

A Congressional Research Service (CRS) report released this week examines a fundamental clash between Canadian cultural policy and U.S. trade interests. Canada's streaming regulation scheme, enacted in April 2023, has triggered a serious test of how the Trump administration will handle trade disputes with its closest neighbor.

The Big Picture

Canada's Online Streaming Act amended the Canadian Broadcasting Act to empower the Canadian Radio-Television and Telecommunications Commission (CRTC) to regulate online streaming services and social media platforms. The move builds on Canadian content requirements dating back to 1971, when policymakers sought to preserve Canada's cultural sovereignty amid concerns that Canadian culture would be dominated by cultural imports, particularly from the United States.

The mechanics are straightforward but costly. In 2024, the CRTC required online streaming services with more than $25 million Canadian in annual Canadian broadcasting revenues to contribute at least 5% of their annual Canadian revenue to Canadian content funds. That threshold equals approximately $18 million US. But the regulatory landscape shifted dramatically on May 21 when the CRTC tripled the contribution requirement to 15 percent of annual Canadian revenues, also issuing requirements related specifically to French-language content.

The escalation triggered immediate friction. One U.S. stakeholder group estimated the Online Streaming Act could generate $7 billion US over five years. U.S. officials and lawmakers argue the act discriminates against American commerce by singling out U.S. streaming giants for financial levies. And some Members of Congress have asserted that the act imposes costs largely on U.S.-based companies while exempting Canadian competitors.

The legal landscape remains unsettled. Canada's Federal Court of Appeal partially halted payments under the act pending the outcome of Motion Picture Association-Canada et al. v. Canadian Association of Broadcasters et al. As of the CRS report's publication on July 23, Canadian media producers have not received any funds paid under the act. The first substantive payments were due in August 2025, but the litigation freeze has blocked distribution.

Political Stakes

The political pressure has been swift. On June 3, Canadian Minister Marc Miller directed the CRTC to review the 15 percent decision. Miller argued that the costs imposed by the new requirements could ultimately fall on Canadian consumers through higher prices. The Canadian government stated it will develop new policy directions for the CRTC to adjust the implementation of the act.

That same month, Canada announced a $600 million Canadian annual federal investment—approximately $426 million US—as an alternative support mechanism for Canadian content. The government stated the new investment would keep Canadian culture accessible and affordable for all Canadians. Some U.S. stakeholders have welcomed Canada's reassessment, though others have expressed their intention to continue engaging on the issue.

For the Trump administration, the Online Streaming Act represents a test case. The United States Trade Representative (USTR) identified the act as a services trade barrier in a 2026 report and has flagged it as a discussion topic in the United States-Mexico-Canada Agreement (USMCA) joint review process. The USTR has also raised concerns about similar local content regulations in Australia, Brazil, and various European countries, suggesting this fight could establish precedent globally.

Congress has already moved on the topic. Rep. Lloyd Smucker, a Pennsylvania Republican, introduced H.R. 8025, titled the Protecting American Streaming and Innovation Act, on March 19. The bill would direct USTR to investigate the Online Streaming Act under Section 301 of the Trade Act of 1974. If the USTR launches such an investigation and finds the act burdens U.S. commerce, the administration would have authority to impose retaliatory tariffs or other measures against Canada.

That possibility carries political weight. Some observers suggest the U.S. may seek to eliminate or narrow Canada's cultural exemption entirely during USMCA renegotiations. The USMCA currently permits Canada to maintain measures related to its cultural industries even if they would otherwise violate the agreement. However, Article 32.6 also permits the U.S. and Mexico to take a measure of equivalent commercial effect in response to Canadian cultural measures.

The Motion Picture Association condemned the CRTC ruling as imposing unprecedented, unnecessary, and discriminatory investment obligations. Some members of Congress have criticized the conditioning of access to the Canadian market on making financial contributions into government-linked funds intended for the Canadian domestic entertainment industry.

The Bottom Line

Although its government has signaled it may roll back the core financial contribution requirements of the Online Streaming Act under significant U.S. pressure, Canadian officials maintain that the act is consistent with Canada's international trade obligations. In the meantime,The Online Streaming Act generates significant revenue for Canadian content, especially as shows funded through the Canada Media Fund have gained popularity with U.S. audiences.

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