In a decisive move reflecting the escalating trade tensions between Canada and the United States, the Canadian province of Ontario has cancelled a $100 million contract with Elon Musk’s Starlink satellite internet company.
The decision comes as a direct response to the US imposing 25 per cent tariffs on nearly all Canadian goods, a move that has sparked a wave of economic retaliation from Canada.
The US tariffs, imposed by President Donald Trump, were initially framed as a measure to address concerns over illegal narcotics trafficking and immigration. However, the Canadian government has viewed these tariffs as an aggressive economic manoeuvre, prompting a swift and decisive response.
Burning Bridges
In retaliation, Canada has also imposed its own 25 per cent tariffs on $106.5 billion worth of American goods, targeting a wide range of products from steel and aluminium to consumer goods.
Ontario’s decision is, indeed, part of a larger strategy of economic retaliation against the US tariffs. Apart from the cancelled contract, the province has also banned American companies from participating in provincial contracts. The move is intended to exert pressure on the US government by targeting American businesses that rely on Canadian markets.
Ontario, Canada’s most populous province—home to approximately 38.5 per cent of the country’s population, with a total population of around 14.75 million people, based on the 2021 Canadian census—is a key economic hub.
It has taken a particularly strong stance against the US tariffs. Premier Doug Ford has been vocal in his criticism, stating that the province will not do business with companies that are “hell-bent on destroying our economy.”
This categorical statement underscores the severity of the situation and the province’s commitment to protecting its economic interests.
By cancelling the deal, Ontario sent a clear message that it will not tolerate economic actions that it perceives as harmful to its interests. The decision also reflects the province’s willingness to leverage its economic power to influence international trade policies.
The contract with the Starlink was a significant initiative aimed at bridging the digital divide in Ontario’s remote areas. Starlink, a satellite internet service provided by Elon Musk’s SpaceX, was poised to deliver high-speed internet to 15,000 homes and businesses that currently lack reliable connectivity.
The $100 million investment was seen as a critical step toward ensuring that all Ontarians, regardless of their location, have access to the digital infrastructure necessary for economic participation and social inclusion.Nevertheless, the contract became a casualty of the broader trade dispute between Canada and the US.
Far-reaching consequences
A staggering 7,500 US-based companies currently operate in Canada, with approximately 1.8 million Canadian jobs hanging in the balance as concerns mount over potential contract cancellations.
Sources reveal that the sheer scale of US business interests in Canada has sparked worries about the far-reaching consequences of severing ties with American entities. As tensions simmer, the livelihoods of nearly two million Canadians remain precariously poised, underscoring the urgent need for a prudent and informed approach to international trade relations.
It has immediate and tangible consequences for these communities—often underserved by traditional internet providers—that were set to benefit from the high-speed internet service. They will now have to wait longer for the connectivity they need to participate fully in the digital economy.
If Starlink’s Canadian operations are impacted, alternatives for internet access in rural Ontario may include Xplornet Communications, Rogers Communications, and Bell Canada.
Yet, these alternatives may not offer the same level of service and affordability as Starlink, potentially leaving many without reliable and high-speed internet. The immediate business losses to the people of Ontario could be substantial, with estimated losses ranging from $500 million to $1 billion in the first year alone.
A double-edged sword
By imposing tariffs on American goods and restricting access to provincial contracts, Ontario is effectively raising the cost of doing business for American companies in Canada.
This could lead to a reduction in trade between the two countries, with potential consequences for both economies. The US-Canada trade volume is approximately $908.9 billion (2022), with $427.7 billion in US exports and $481.2 billion in US imports, resulting in a $53.5 billion trade deficit for the US.
Cancelling contracts with US business entities, including Starlink, could harm Canada’s future international business ties, reducing investment and economic growth. Starlink’s Canadian operations may be impacted, limiting internet access for rural areas and affecting e-commerce, remote work, and innovation.
Various industries would be affected, including agriculture, tourism, e-commerce, and remote work. The loss of internet access would hinder businesses’ ability to operate efficiently, leading to significant economic losses and potentially even job losses.
A temporary breather
Interestingly, Ontario has since paused its retaliatory measures after the US agreed to delay the tariffs for 30 days. The contract between Ontario and Starlink was terminated on February 3, 2025, in response to the 25 per cent US tariffs imposed on Canadian goods.
However, it is worth noting that the retaliatory measures, including the contract termination, were paused on February 4, 2025, after the US tariffs were paused for at least 30 days. This temporary reprieve suggests that both sides are open to negotiation and are seeking a resolution to the trade dispute.
Still, the pause does not necessarily indicate a de-escalation of tensions. The underlying issues that led to the imposition of tariffs remain unresolved, and the potential for further economic retaliation looms large.
The 30-day delay provides an opportunity for both Canada and the US to engage in diplomatic discussions aimed at finding a mutually acceptable solution. However, the stakes are high, and the outcome of these negotiations will have far-reaching implications for the economic relationship between USA and Canada.
A digital drought in the offing
The delay in internet access could have a ripple effect on these communities, impacting everything from education and healthcare to business development and social connectivity. For many residents, high-speed internet is not just a convenience but a necessity for accessing essential services and opportunities.
Ontario’s decision to pause its retaliatory measures offers a glimmer of hope for a resolution, but the underlying issues remain unresolved. In the meantime, the 15,000 homes and businesses in remote areas of Ontario will have to wait for the high-speed internet access they were promised, a reminder of the real-world consequences of the international trade dispute.
A tightrope walk
In a nutshell, the cancellation of the Starlink contract highlights the vulnerability of international business deals to geopolitical tensions. Companies like SpaceX, which operate on a global scale, must navigate complex political landscapes where economic decisions are often influenced by broader geopolitical considerations.
On the flip side, Canada may face significant penalties for unilaterally terminating the Starlink contract, including financial compensation, legal repercussions, reputational damage, and potential trade agreement implications.
