I have a gun, I can force you to do whatever I want.

That said, the Canadian government can only 'kill' Google in Canada. Since Google wants those Canadian dollars, they will comply.

This is a serious danger with multinational companies. More and more sovereign nations will force these corporations to comply with demands that conflict with the desires of peoples in other nations.

Would Google give the information on select US users that have visited China to the Chinese government?

Would Google give the information on select US users that have visited China to the Chinese government if it meant getting kicked out of a $50 billion market?

When business interests dictate that money comes first, and ideals like freedom come later, money always wins.

But if the data isn't stored in Canada, not viewable from Canada, does Canada really have jurisdiction?

Of course this is government, they can do whatever the hell they want. If they want to tell Google they have to delete it globally or they'll be blocked, there's not much anyone else can do about it. Though Google is probably close enough to universal to call their bluff. I know I'd be pissed and writing to my congressman.

Google operates in Canada (including having offices and employees), and must obey Canadian law if it would like to continue to do so.

While those who are fans of international corporations (for some reason), seem to think that these global megacorps should be above the law, having to answer to no country's authority, the reality is, a global corporation is beholden to follow the law of every country it operates in. And hence, if Canada tells Google to do something internationally, Google can either choose to comply, or not do business in Canada.

You can see a similar effect in how the US imposes bans on operating in some countries. If a company wants to do business in the US, it has to obey the US's bans on doing business with North Korea or Iran or what have you. Since so much global business includes US products or needs the US market, our bans have to be followed by more than just folks who live here in the US. If you recall the whole issue with ZTE being effectively shut down over a US ban because they dealt with Iran, you can see how a US law can shut down a Chinese company for doing business with a completely different country.

A country can define the conditions for doing business there as whatever it wants, and can impose any level of punishment that it can manage to enforce on a company that doesn't comply. That's sovereignty, and all countries have it.