Has Trump struck a trade deal with China – and what about other countries?
The United States has reached an agreement with China on accelerating shipments of rare earth minerals to the US, amid efforts to end a trade war between the world's two biggest economies.
US President Donald Trump said on Thursday that the US had signed a deal with China the previous day, without providing more details, adding that he expects to soon have a trade deal with India as well.
Thursday's announcement follows talks in Geneva in May, which led the US and China to reduce mutual tariffs.
In June, talks in London set a framework for negotiations. Thursday's announcement appeared to formalise that agreement.
'The [Trump] administration and China agreed to an additional understanding for a framework to implement the Geneva agreement,' a White House official said on Thursday.
China also confirmed the framework for a deal, with its Ministry of Commerce stating that it will review and approve applications for items subject to export control rules.
What do we know about the US-China deal?
During US-China trade talks in Geneva, Beijing committed to removing non-tariff countermeasures imposed against the US following Donald Trump's 'Liberation Day' announcement on April 2.
That was when Washington announced so-called 'reciprocal' import duties but later paused most of them, with the exception of its 145 percent tariff on China, for 90 days to allow for negotiations. This pause is due to come to an end on July 9.
In retaliation, China imposed its own tariff of 125 percent on US goods, suspended exports on a wide range of critical minerals, upending supply chains crucial to US carmakers, semiconductor companies and military contractors.
But on Thursday, US Commerce Secretary Howard Lutnick told Bloomberg TV that 'they're [China] going to deliver rare earths to us', and once they do that 'we'll take down our countermeasures'. Those US countermeasures include export curbs on materials such as ethane, which is used to make plastic, and chip software.
A spokesperson for the Chinese Commerce Ministry said on Friday: 'In recent days, after approval, both sides have further confirmed details on the framework.'
The spokesperson added: 'The Chinese side will review and approve eligible applications for export of controlled items in accordance with the law. The US side will correspondingly cancel a series of restrictive measures taken against China.'
In early June, China granted temporary export licences to rare earth suppliers of the top three US automakers, according to two sources familiar with the matter, as supply chain disruptions began to surface from export curbs on those materials.
This week's deal, which Lutnick said was signed on Wednesday, would amount to a wider agreement by codifying the terms laid out in Geneva, including a commitment from China to deliver rare earths to all US firms.
Why are Chinese rare earth minerals so vital?
China's export of rare earth elements is central to ongoing trade negotiations with the US. Beijing has a virtual monopoly of critical minerals, mining 70 percent of the world's rare earths and processing roughly 90 percent of their supply.
Critical minerals, a group of 17 elements which are essential to numerous manufacturing processes, have become particularly important for the auto industry, which relies on rare earth magnets for steering systems, engines and catalytic converters.
Car manufacturers have already complained about factories being brought to a near halt because of supply chain shortages of rare earths and the magnets they are used to make. A Ford executive said earlier this week that the company was living 'hand to mouth'.
Rare earths are also vital for the transition to clean energy and are used in an array of products, including wind turbines, smartphones and televisions. They are also used to make fighter jets, missile systems and AI processors.
What other trade deals does Trump claim to be close to agreeing?
Lutnick told Bloomberg that Trump is also preparing to finalise a suite of trade deals in the coming weeks, ahead of his July 9 deadline for reinstating higher trade tariffs, which he paused on April 9.
'We're going to do top 10 deals, put them in the right category, and then these other countries will fit behind,' he said.
Lutnick didn't specify which nations would be part of that first wave of trade pacts. Earlier on Thursday, however, Trump suggested the US was nearing an agreement with India.
Indian trade officials, led by chief negotiator Rajesh Agarwal, are expected to hold meetings in Washington for two days this week, Bloomberg News has reported.
In recent months, US officials have also held talks with countries, including Vietnam, South Korea, Japan and the EU.
So far, only the United Kingdom has reached a trade agreement with the US, while China secured lower reciprocal tariffs in Geneva.
Still, the pact with the UK left several questions unaddressed, including the discount rates applied to certain British metal exports.
Which deals is the US still struggling to strike?
The majority of America's major trade partners – from Canada to Vietnam and South Korea – are all expected to have fraught discussions with Washington before reciprocal tariffs expire in early July.
Most countries are hoping to have tariffs whittled down by as much as possible, and, failing that, to extend the July deadline, but there is no certainty yet for any of them.
Talks which have been particularly tricky include:
A major question mark remains over an agreement with the European Union, which ran a $235.6bn trade surplus with the US in 2024.
The hurdle facing EU leaders and the European Commission, which oversees trade issues for the 27-member bloc, is whether to accept an 'asymmetrical' trade deal with the US, under which terms could be more favourable to the US in order to get a deal done faster.
Some member states are thought to be opposed to tit-for-tat retaliation, preferring a quick tariff deal over a perfect one.
But others disagree. France has rejected the notion of any deal skewed in favour of the US and is instead pushing for a complete removal of tariffs.
Japan is keen on settling all potential US tariffs in one fell swoop. But a sticking point in negotiations has been the 25 percent tariffs on cars and car parts imposed by Trump.
Washington is focused on autos because that sector is responsible for most of its trade deficit with Japan.
But Tokyo views its automotive industry as a key pillar in its economy as it generates about 10 percent of gross domestic product (GDP).
On Thursday, Japan's chief trade negotiator, Ryosei Akazawa, reiterated Tokyo's position, telling reporters: 'We consider the 25 percent automobile tariff to be unacceptable.'
Could the US extend its tariffs deadline past July?
President Trump could decide to extend the deadline for reimposing tariffs on most of the world's countries, the White House said on Thursday.
Trump's July deadline for restarting tariffs is 'not critical', White House Press Secretary Karoline Leavitt told reporters.
'Perhaps it could be extended, but that's a decision for the president to make,' Leavitt said.
She also said that if any of those countries refuse to make a trade deal with the US by the deadlines, 'the president can simply provide these countries with a deal'.
'And that means the president can pick a reciprocal tariff rate that he believes is advantageous for the United States, and for the American worker,' she added.
Meanwhile, White House National Economic Council Director Kevin Hassett told Fox Business on Tuesday: 'We know that we're very, very close to a few countries.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Jazeera
2 hours ago
- Al Jazeera
Why manufacturing consent for war with Iran failed this time
On June 22, American warplanes crossed into Iranian airspace and dropped 14 massive bombs. The attack was not in response to a provocation; it came on the heels of illegal Israeli aggression that took the lives of 600 Iranians. This was a return to something familiar and well-practised: an empire bombing innocents across the orientalist abstraction called 'the Middle East'. That night, US President Donald Trump, flanked by his vice president and two secretaries, told the world 'Iran, the bully of the Middle East, must now make peace'. There is something chilling about how bombs are baptised with the language of diplomacy and how destruction is dressed in the garments of stability. To call that peace is not merely a misnomer; it is a criminal distortion. But what is peace in this world, if not submission to the West? And what is diplomacy, if not the insistence that the attacked plead with their attackers? In the 12 days that Israel's illegal assault on Iran lasted, images of Iranian children pulled from the wreckage remained absent from the front pages of Western media. In their place were lengthy features about Israelis hiding in fortified bunkers. Western media, fluent in the language of erasure, broadcasts only the victimhood that serves the war narrative. And that is not just in its coverage of Iran. For 20 months now, the people of Gaza have been starved and incinerated. By the official count, more than 55,000 lives have been taken; realistic estimates put the number at hundreds of thousands. Every hospital in Gaza has been bombed. Most schools have been attacked and destroyed. Leading human rights groups like Amnesty International and Human Rights Watch have already declared that Israel is committing genocide, and yet, most Western media would not utter that word and would add elaborate caveats when someone does dare say it live on TV. Presenters and editors would do anything but recognise Israel's unending violence in an active voice. Despite detailed evidence of war crimes, the Israeli military has faced no media censure, no criticism or scrutiny. Its generals hold war meetings near civilian buildings, and yet, there are no media cries of Israelis being used as 'human shields'. Israeli army and government officials are regularly caught lying or making genocidal statements, and yet, their words are still reported as the truth. A recent study found that on the BBC, Israeli deaths received 33 times more coverage per fatality than Palestinian deaths, despite Palestinians dying at a rate of 34 to 1 compared with Israelis. Such bias is no exception, it is the rule for Western media. Like Palestine, Iran is described in carefully chosen language. Iran is never framed as a nation, only as a regime. Iran is not a government, but a threat —not a people, but a problem. The word 'Islamic' is affixed to it like a slur in every report. This is instrumental in quietly signalling that Muslim resistance to Western domination must be extinguished. Iran does not possess nuclear weapons; Israel and the United States do. And yet only Iran is cast as an existential threat to world order. Because the problem is not what Iran holds, but what it refuses to surrender. It has survived coups, sanctions, assassinations, and sabotage. It has outlived every attempt to starve, coerce, or isolate it into submission. It is a state that, despite the violence hurled at it, has not yet been broken. And so the myth of the threat of weapons of mass destruction becomes indispensable. It is the same myth that was used to justify the illegal invasion of Iraq. For three decades, American headlines have whispered that Iran is just 'weeks away' from the bomb, three decades of deadlines that never arrive, of predictions that never materialise. But fear, even when unfounded, is useful. If you can keep people afraid, you can keep them quiet. Say 'nuclear threat' often enough, and no one will think to ask about the children killed in the name of 'keeping the world safe'. This is the modus operandi of Western media: a media architecture not built to illuminate truth, but to manufacture permission for violence, to dress state aggression in technical language and animated graphics, to anaesthetise the public with euphemisms. Time Magazine does not write about the crushed bones of innocents under the rubble in Tehran or Rafah, it writes about 'The New Middle East' with a cover strikingly similar to the one it used to propagandise regime change in Iraq 22 years ago. But this is not 2003. After decades of war, and livestreamed genocide, most Americans no longer buy into the old slogans and distortions. When Israel attacked Iran, a poll showed that only 16 percent of US respondents supported the US joining the war. After Trump ordered the air strikes, another poll confirmed this resistance to manufactured consent: only 36 percent of respondents supported the move, and only 32 percent supported continuing the bombardment The failure to manufacture consent for war with Iran reveals a profound shift in the American consciousness. Americans remember the invasions of Afghanistan and Iraq that left hundreds of thousands of Afghans and Iraqis dead and an entire region in flames. They remember the lies about weapons of mass destruction and democracy and the result: the thousands of American soldiers dead and the tens of thousands maimed. They remember the humiliating retreat from Afghanistan after 20 years of war and the never-ending bloody entanglement in Iraq. At home, Americans are told there is no money for housing, healthcare, or education, but there is always money for bombs, for foreign occupations, for further militarisation. More than 700,000 Americans are homeless, more than 40 million live under the official poverty line and more than 27 million have no health insurance. And yet, the US government maintains by far the highest defence budget in the world. Americans know the precarity they face at home, but they are also increasingly aware of the impact US imperial adventurism has abroad. For 20 months now, they have watched a US-sponsored genocide broadcast live. They have seen countless times on their phones bloodied Palestinian children pulled from rubble while mainstream media insists, this is Israeli self-defence. The old alchemy of dehumanising victims to excuse their murder has lost its power. The digital age has shattered the monopoly on narrative that once made distant wars feel abstract and necessary. Americans are now increasingly refusing to be moved by the familiar war drumbeat. The growing fractures in public consent have not gone unnoticed in Washington. Trump, ever the opportunist, understands that the American public has no appetite for another war. And so, on June 24, he took to social media to announce, 'the ceasefire is in effect', telling Israel to 'DO NOT DROP THOSE BOMBS,' after the Israeli army continued to attack Iran. Trump, like so many in the US and Israeli political elites, wants to call himself a peacemaker while waging war. To leaders like him, peace has come to mean something altogether different: the unimpeded freedom to commit genocide and other atrocities while the world watches on. But they have failed to manufacture our consent. We know what peace is, and it does not come dressed in war. It is not dropped from the sky. Peace can only be achieved where there is freedom. And no matter how many times they strike, the people remain, from Palestine to Iran — unbroken, unbought, and unwilling to kneel to terror. The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial stance.
Al Jazeera
3 hours ago
- Al Jazeera
‘Hey Daddy': How different world leaders massage Trump's ego
Describing Israel and Iran fighting each other at his NATO pre-summit news conference in The Hague this week, US President Donald Trump drew an analogy with children fighting in a schoolyard, who eventually had to be separated. 'Daddy has to sometimes use strong language,' Mark Rutte, NATO secretary-general, chimed in. Asked about the comment after the summit, Trump said: 'No, he likes me. I think he likes me. If he doesn't I'll let you know. I'll come back and hit him hard, OK? He did it very affectionately. Hey Daddy. You're my Daddy.' The White House decided Rutte was flattering the US president, and made a reel of Trump's visit to the Netherlands, set to the music of Usher's Hey Daddy. Rutte's flattery of Trump didn't stop there. On tackling the Russia-Ukraine war, Rutte told reporters before the NATO summit: 'When he came in office, he started the dialogue with President Putin, and I always thought that was crucial. And there's only one leader who could break the deadlock originally, and it had to be the American president, because he is the most powerful leader in the world.' But how sincere are world leaders' statements about Donald Trump? Do they genuinely serve to improve bilateral relations and does flattery work? Who has handled Trump well and what have the results been? Neither Rutte, nor any other European leader, engaged in any kind of dialogue with Russian President Vladimir Putin for a long time after the summer of 2022, the year of his invasion of Ukraine, believing it pointless. German Chancellor Olaf Scholz was severely criticised as 'defeatist' for phoning Putin last November, while Hungary's Viktor Orban and Slovakia's Robert Fico, the only European leaders to have visited the Kremlin during the war, have been viewed as openly collaborationist. Yet when Trump started talks with Putin, many Europeans paid him the same compliment as Rutte when they made their inaugural visits to the White House after he took office in January. 'Thank you for changing the conversation to bring about the possibility that now we can have a peace deal, and we will work with you,' said the United Kingdom's prime minister, Keir Starmer, in the Oval Office in February. Starmer pulled a few rabbits out of hats. Knowing Trump's fondness for the notion of hereditary power, he drew from his jacket a letter from King Charles III containing an invitation for an unprecedented second state visit to Windsor Castle. Trump was momentarily speechless. 'Your country is a fantastic country, and it will be our honour to be there, thank you,' Trump said when he'd gathered himself. Starmer and Trump exchanged a few handshakes while speaking and Starmer repeatedly touched Trump's shoulder in a sign of affection. But did all this flattery have much effect? Trump announced he was freezing military aid to Ukraine the following month, much to the outrage of the UK, along with Nordic and Baltic countries. Both Starmer and Italy's prime minister, Giorgia Meloni, identified Ukraine as a key issue for Trump, who has made it clear he wants to win the Nobel Peace Prize by ending international conflicts. So far, he has claimed credit for ending this month's '12-Day War' between Israel and Iran, preventing nuclear war following the May 7 air battle between India and Pakistan, and overseeing a peace deal between the Democratic Republic of the Congo (DRC) and Rwanda. Meloni, therefore, tried a similarly flattering approach to Trump. 'Together we have been defending the freedom of Ukraine. Together we can build a just and lasting peace. We support your efforts, Donald,' she said during her White House visit in April. Meloni astutely punched all of Trump's hot-button issues in her opening remarks, saying Italy had policies to combat Fentanyl, an addictive painkiller that Trump has blamed Canada and Mexico for allowing into the country, to invest $10bn in the US economy and to control undocumented immigration. She even adapted Trump's slogan, Make America Great Again, to Europe. 'The goal for me is to Make the West Great Again. I think we can do it together,' Meloni said to a beaming Trump. None of this has translated into a state visit by Trump to Rome, a move which would cement Meloni's position as a major European leader, however. Meanwhile, newly elected Canadian Prime Minister Mark Carney was both flattering and firm with Trump last month. He complimented Trump on being 'a transformational president' who had sided 'with the American worker', but also shut down Trump's territorial ambition to annex Canada as the 51st US state. 'It's not for sale, won't be for sale ever,' Mark Carney said. Relations seemed to have taken a turn for the better following Trump's friction with Carney's predecessor, Justin Trudeau. Trump called him 'very dishonest and weak' at the 2018 G7 summit in Canada before storming off early. But Carney may not have had much effect at all. On Friday, Trump ended trade talks with Canada and threatened to impose additional tariffs on exports over Canada's new digital services tax. Which meetings have gone less well? There was little warmth in Trump's White House meeting with French President Emmanuel Macron in February. Braced for confrontation with a leader who claims to lead Europe in strategic thought, Trump spoke from lengthy, defensive, scripted remarks which attempted to justify his Ukraine policy. Macron preached that peace in Ukraine must not mean surrender – a sentiment shared by many European leaders, but not expressed to Trump. Trump was cordial with Macron, but not affectionate. Meanwhile, France is holding out on any sort of capitulation to Trump in European Union trade talks. Other members of the EU want to settle for an 'asymmetric' trade deal that might benefit the US more than the EU, just to get it done. What's more, following the G7 meeting in Canada two weeks ago, it was clear no love was lost between the two leaders: Trump called Macron 'publicity seeking' in a social media post on June 17. Ukrainian President Volodymyr Zelenskyy was mauled by Trump and Vice President J D Vance on February 28, when he went to the White House to sign a mineral rights agreement he hoped would bring US military aid. He and Vance clashed over direct talks with Russia over Ukraine's head, and Vance lambasted Zelenskyy for failing to show enough 'gratitude' to the US. 'You're playing with millions of people's lives. You're gambling with World War Three,' said Trump. However, Zelenskyy and Trump appeared to have patched things up a little when they held an impromptu meeting while attending the funeral of Pope Francis at the Vatican in April. A White House spokesperson described the encounter as 'very productive'. Last month, Trump ambushed South African President Cyril Ramaphosa at the White House when he played him a video of a South African opposition party rally in favour of evicting white farmers. Trump accused South Africa of carrying out a 'genocide' against white farmers. Ramaphosa was visibly discomfited, but he patiently explained that under a parliamentary system, different viewpoints are expressed, which don't represent government policy, and that South Africa is a violent country where most victims of violence are Black. 'You are a partner of South Africa and as a partner you are raising concerns which we are willing to talk to you about,' Ramaphosa said, calming Trump a little. Trump was sidetracked into talking about a Jumbo Jet that Qatar had gifted him during his Middle Eastern tour. 'I'm sorry I don't have a plane to give you,' said Ramaphosa, as if to make a virtue of his absence of flattery. Does flattery work with Trump? Some experts believe that flattery may help to prevent confrontation with Trump. Some observers have argued it helps 'to contain the American president's impulses'. But flattery does little to change actual US policy. Rutte and other NATO leaders failed to draw the US back into the Contact Group helping Ukraine with weapons. 'A summit dedicated to the sole aim of making Trump feel good is one with very limited aims indeed. All it does is push the difficult decisions forward for another day,' wrote Andrew Gawthorpe, a lecturer in history and international studies at Leiden University, the Netherlands, in The Conversation, a UK publication. Those who do have good relations with Trump don't necessarily come away with the things they want, either. Starmer's US-UK trade deal keeps tariffs in place for British companies exporting to the US, albeit lower ones than Trump had been threatening. Meloni is still waiting for Trump to bestow her a visit. Respectful firmness, on the other hand, does seem to work. Trump has dropped his campaign to redraw US borders by absorbing Canada and Greenland, which is owned by Denmark. Carney's firmness helped, because it carried a sense of finality. Carney had just won an election and Trump acknowledged 'it was probably one of the greatest comebacks in the history of politics. Maybe even greater than mine.' Denmark has been similarly firm. Prime Minister Mette Frederiksen has said existing agreements with the US already allow it to station military bases there, while Greenlanders don't want to be colonised by Americans. Trump's attempts to embarrass Zelenskyy and Ramaphosa also backfired. Europe has stepped in to make up the shortfall in US military aid to Ukraine, casting the US as a fickle ally. Trump's 'white genocide' video did little to convince Americans that South Africa was committing a genocide against Dutch Boers, and his offer of asylum to a number of them has been roundly criticised in the US.
Al Jazeera
6 hours ago
- Al Jazeera
What is Canada's digital tax and why is Trump killing trade talks over it?
As Canada pushes ahead with a new digital services tax on foreign and domestic technology companies, United States President Donald Trump has retaliated by ending all trade talks and threatened to impose additional tariffs on exports from Ottawa. In a post on his Truth Social platform on Friday, Trump called the new Canadian tax structure a 'direct and blatant attack on our country', adding that Canada is 'a very difficult country to trade with'. 'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,' he wrote. He added that he would announce new tariffs of his own for Canada in a matter of days. US companies such as Amazon, Meta, Google and Uber face an estimated $2bn in bills under the new tax. Trump's decision marks a sharp return to trade tensions between the two countries, abruptly ending a more cooperative phase since Mark Carney's election as Canada's prime minister in March. It also marks a further escalation in the trade-as-pressure tactic under Trump's second term in Washington. The US is Canada's largest trading partner by far, with more than 80 percent of Canadian exports destined for the US. In 2024, total bilateral goods trade exceeded US$762bn, with Canada exporting $412.7bn and importing $349.4bn – leaving the US, which counts Canada as its second-largest trading partner, with a goods deficit of $63.3bn. A disruption due to tariffs on products like automobiles, minerals, energy or aluminium could have large ripple effects across both economies. So, what is Canada's digital tax? Why is Carney facing domestic pushback on the taxes? And how is Washington responding? What is Canada's digital services tax? Canada's Digital Services Tax Act (DSTA) came into force in June last year. It is a levy on tech revenues generated from Canadian users – even if providers do not have a physical presence in the country. The DSTA was first proposed during the 2019 federal election under then-Prime Minister Justin Trudeau, and received approval in Canada on June 20, 2024. It came into force a week later, on June 28. The first payments of this tax are due on Monday, June 30, 2025. Large technology firms with global revenues exceeding $820m and Canadian revenues of more than $14.7m must pay a 3 percent levy on certain digital services revenues earned in Canada. Unlike traditional corporate taxes based on profits, this tax targets gross revenue linked to Canadian user engagement. Digital services the levy will apply to include: Online marketplaces, social media platforms, digital advertising and the sale or licensing of user data. One of the most contentious parts of the new framework for businesses is its retroactive nature, which demands payments on revenues dating back to January 1, 2022. Why is Trump suspending trade talks over the new tax? On June 11, 21 US Congress members sent a letter to President Trump, urging him to pressure Canada to eliminate or pause its Digital Services Tax. 'If Canada decides to move forward with this unprecedented, retroactive tax, it will set a terrible precedent that will have long-lasting impacts on global tax and trade practices,' they wrote. Then, in a Truth Social post on Friday this week, Trump said Canada had confirmed it would continue with its new digital services tax 'on our American Technology Companies, which is a direct and blatant attack on our Country'. He added that the US would be 'terminating ALL discussions on Trade with Canada, effective immediately' and that he would be levying new tariffs of his own on Canada within seven days. 'They have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products,' Trump said, adding, '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.' Later, at the Oval Office, Trump doubled down, saying: 'We have all the cards. We have every single one.' He noted that the US holds 'such power over Canada [economically]'. 'We'd rather not use it,' Trump said, adding: 'It's not going to work out well for Canada. They were foolish to do it. 'Most of their business is with us, and when you have that circumstance, you treat people better.' Trump also said he would order a Section 301 investigation under the Trade Act to assess the DSTA's effect on US commerce, which could potentially lead to other punitive measures. On Friday, White House National Economic Council director, Kevin Hassett, told the Fox Business Friday programme: 'They're taxing American companies who don't necessarily even have a presence in Canada.' Calling the tax 'almost criminal', he said: 'They're going to have to remove it. And I think they know that.' How has Canada responded? Relations had seemed friendlier between the two North American neighbours in recent months as they continue with trade talks. Trump and former Prime Minister Justin Trudeau had clashed previously – with Trump calling Trudeau 'very dishonest' and 'weak' during the 2018 G7 talks in Canada. But newly elected Carney enjoyed a cordial visit with Trump in May at the White House, while Trump travelled to Canada for the G7 summit in Alberta on June 16 and 17. Carney said at the summit that the two had set a 30-day deadline for trade talks. In a brief statement on Friday, Prime Minister Carney's office said of Trump's new threats to suspend trade talks over the digital tax: 'The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses.' Last week, Canadian Finance Minister Francois-Philippe Champagne told reporters that the digital tax could be negotiated as part of the broader, ongoing US-Canada trade discussions. 'Obviously, all of that is something that we're considering as part of broader discussions that you may have,' he had said. Those discussions had been expected to result in a trade deal in July. However, they are now in limbo. What do Canadian business leaders say? Carney has been facing pressure from domestic businesses as well, which have lobbied the government to pause the digital services tax, underlining that the new framework would increase their costs for providing services and warning against retaliation from the US. The Business Council of Canada, a nonprofit organisation representing CEOs and leaders of major Canadian companies, said in a statement that, for years, it 'has warned that the implementation of a unilateral digital services tax could risk undermining Canada's economic relationship with its most important trading partner, the United States'. 'That unfortunate development has now come to pass,' the statement noted. 'In an effort to get trade negotiations back on track, Canada should put forward an immediate proposal to eliminate the DST in exchange for the elimination of tariffs from the United States.' Has Trump used tariffs to pressure Canada before? Yes. Prior to the DSTA, Trump has used tariffs to pressure Canada over what he says is its role in the flow of the addictive drug, fentanyl, and undocumented migration into the US, as well as broader trade and economic issues. On January 20, in his inaugural address, Trump announced a 25 percent tariff on all Canadian goods and a 10 percent tariff on Canadian energy resources. Trump claimed that Canada has a 'growing footprint' in fentanyl production, and alleged that Mexican cartels operate fentanyl labs in Canada, particularly in British Columbia, Alberta and Ontario. These tariffs were paused for 30 days following assurances from Canada that appropriate action would be taken to curb the flow of fentanyl, and then re-imposed in early March. Do other countries levy a similar digital tax? Yes, several countries around the world have introduced digital services taxes (DSTs) similar to Canada's. France was one of the first to introduce a DST in 2019, eliciting an angry response from Trump who was serving his first term as president. The French tax is a 3 percent levy on revenues from online advertising, digital platforms and sales of user data. The UK followed with a 2 percent tax on revenues from social media platforms and search engines. Spain, Italy, and Austria have also implemented similar taxes, with rates ranging from 3 to 5 percent. Turkiye has one of the highest DST rates at 7.5 percent, covering a wide range of digital services such as content streaming and advertising. Outside Europe, India has a 2 percent 'equalisation levy' on foreign e-commerce operators which earn revenues from Indian users. Kenya and Indonesia have also created their own digital tax systems, though they're structured slightly differently – Indonesia, for instance, applies Value Added Tax (VAT) – or sales tax – on foreign digital services, rather than a DST. The US government has strongly opposed these taxes; some of these disputes have been paused as part of ongoing negotiations led by the Organization for Economic Co-operation and Development (OECD), an international organisation made up of 38 member countries, which is working on a global agreement for taxing digital companies fairly. Canada held off on implementing its DST until 2024 to give time for the OECD talks. But when progress stalled, it went ahead with the 3 percent tax that applies retroactively since January 2022. Should the EU be worried about this? The European Union is likely to be watching this situation closely as digital tax is likely to be a key concern during its own trade talks with the US. Trump has repeatedly warned that similar tax measures from other allies, including EU countries, could face severe retaliation. Trump's administration has previously objected to digital taxes introduced by EU member states like France, Italy, and Spain. In 2020, the US Trade Representative investigated these taxes under Section 301 and threatened retaliatory tariffs, though those were paused pending OECD-led global tax negotiations. The European Commission has confirmed that digital taxation remains on the agenda, especially if a global deal under the OECD fails to materialise. President Ursula von der Leyen said on June 26 that 'all options remain on the table' in trade discussions with the US, including enforcement mechanisms against discriminatory US measures. The high-stakes trade negotiations ongoing between the US and the EU have a deadline for July 9 – the date that Trump's 90-day pause on global reciprocal tariffs is due to expire. Trump has threatened to impose new tariffs of up to 50 percent on key European exports, including cars and steel, if a deal is not reached. In response to these threats, the EU has prepared a list of retaliatory tariffs worth up to 95 billion euros ($111.4bn), which would target a broad range of US exports, from agricultural products to Boeing aircraft. EU leaders have signalled that they will defend the bloc's tax sovereignty, while remaining open to negotiation.
