Trump says he's ending trade talks with Canada over its 'egregious' tax on technology firms

Economic Times

16 hours ago

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President Donald Trump said Friday that he's suspending trade talks with Canada over its plans to continue with its tax on technology firms, which he called "a direct and blatant attack on our country."Trump, in a post on his social media network, said Canada had just informed the U.S. that it was sticking to its plan to impose the digital services tax, which applies to Canadian and foreign businesses that engage with online users in Canada. The tax is set to go into effect Monday."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," Trump said in his post.Trump's announcement was the latest swerve in the trade war he's launched since taking office for a second term in January. Progress with Canada has been a roller coaster, starting with the U.S. president poking at the nation's northern neighbor and repeatedly suggesting it would be absorbed as a U.S. state.Canadian Prime Minister Mark Carney said Friday that his country would "continue to conduct these complex negotiations in the best interests of Canadians. It's a negotiation."Trump later said he expects that Canada will remove the tax."Economically we have such power over Canada. We'd rather not use it," Trump said in the Oval Office. "It's not going to work out well for Canada. They were foolish to do it."When asked if Canada could do anything to restart talks, he suggested Canada could remove the tax, predicted it will but said, "It doesn't matter to me."Carney visited Trump in May at the White House, where he was polite but firm. Trump last week traveled to Canada for the G7 summit in Alberta, where Carney said that Canada and the U.S. had set a 30-day deadline for trade talks.The digital services tax will hit companies including Amazon, Google, Meta, Uber and Airbnb with a 3% levy on revenue from Canadian users. It will apply retroactively, leaving U.S. companies with a $2 billion U.S. bill due at the end of the month."We appreciate the Administration's decisive response to Canada's discriminatory tax on U.S. digital exports," Matt Schruers, chief executive of the Computer & Communications Industry Association, said in a statement.Canada and the U.S. have been discussing easing a series of steep tariffs Trump imposed on goods from America's neighbor.The Republican president earlier told reporters that the U.S. was soon preparing to send letters to different countries, informing them of the new tariff rate his administration would impose on them.Trump has imposed 50% tariffs on steel and aluminum as well as 25% tariffs on autos. He is also charging a 10% tax on imports from most countries, though he could raise rates on July 9, after the 90-day negotiating period he set would expire.Canada and Mexico face separate tariffs of as much as 25% that Trump put into place under the auspices of stopping fentanyl smuggling, though some products are still protected under the 2020 U.S.-Mexico-Canada Agreement signed during Trump's first term.Addressing reporters after a private meeting with Republican senators Friday, Treasury Secretary Scott Bessent declined to comment on news that Trump had ended trade talks with Canada."I was in the meeting," Bessent said before moving on to the next question.About 60% of U.S. crude oil imports are from Canada, and 85% of U.S. electricity imports as well.Canada is also the largest foreign supplier of steel, aluminum and uranium to the U.S. and has 34 critical minerals and metals that the Pentagon is eager to obtain.About 80% of Canada's exports go to the U.S.Daniel Beland, a political science professor at McGill University in Montreal, said it is a domestic tax issue, but it has been a source of tensions between Canada and the United States for a while because it targets U.S. tech giants."The Digital Services Tax Act was signed into law a year ago so the advent of this new tax has been known for a long time," Beland said. "Yet, President Trump waited just before its implementation to create drama over it in the context of ongoing and highly uncertain trade negotiations between the two countries."