Trump terminates trade talks with Canada
President Donald Trump said Friday that he had terminated trade discussions with Canada, citing an incoming Canadian tax on tech companies including ones based in the U.S..
The decision to end negotiations, which have been ongoing for several months, came after Canada announced a digital service tax, Trump said, calling it “a direct and blatant attack on our Country.”
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,” he said.
Digital services taxes are a mechanism for nations to tax internet services instead of taxes on things that are real. Countries with these taxes can collect revenue from large companies that operate online — even if the business is unprofitable. American firms, especially Big Tech companies such as Meta, Apple, Google, Amazon and Microsoft, are disproportionately affected by DSTs, according to a report published last year by the nonpartisan Congressional Research Service.
Trump has taken particular issue with DSTs throughout trade negotiations with other countries, commonly referring to them as “non-tariff trade barriers.” A new DST for Canada will start on Monday and will be in effect from 2022.
If the US raised taxes on Canada, Canada would probably respond by raising duties on US imports. That would take a toll on both countries’ economies.
The U.S. does business with Canada more than any other country. Currently, the U.S. has a tariff rate of 25% applied to non-USMCA goods that are imported from Canada. Trump has put a 10% tax on energy items, so that doesn't include them. It also bears much of the brunt of Trump's 50% tax on steel and aluminum imports — it is the largest foreign supplier of those materials to the U.S.
Last week Canada's finance minister said that he would not delay implementation of a digital services tax even as U.S. trade talks continue. Any firm that makes more than $15 million off of Canadian internet users is subject to a 3% tax on those revenues.
