Talks with US back on track after Canada drops tech tax plan
U.S. President Donald Trump had previously halted discussions, criticizing Canada's intention to implement the tax as "a direct and blatant attack on our country." In response to the evolving trade situation, the Canadian government stated that it would withdraw the Digital Services Tax "in anticipation" of reaching a trade agreement. This tax was set to take effect on June 30.
Following a phone call between Carney and Trump, Carney's office confirmed that both leaders agreed to resume negotiations. In a statement, Carney emphasized that "today's announcement will support a resumption of negotiations toward the July 21, 2025, timeline set forth during this month's G7 Leaders' Summit in Kananaskis."
Carney had previously visited Trump at the White House in May, maintaining a polite but assertive demeanor. When Trump attended the G7 summit in Alberta, Carney noted that both countries had established a 30-day deadline for trade discussions.
In a social media post, Trump indicated that Canada had reaffirmed its plan to move forward with the digital services tax, which would affect both Canadian and international companies interacting with users in Canada. This tax would impose a three percent charge on revenue from Canadian users on companies such as Amazon, Google, Meta, Uber, and Airbnb. It would apply retroactively, resulting in a potential US$2 billion bill for U.S. firms by the month's end.
Daniel Béland, a political science professor at McGill University in Montreal, described Carney's decision to retract the tax as a "clear victory" for Trump. He suggested that while this move could have been necessary for the trade negotiations, Carney's actions were a direct concession to appease Trump, which ultimately benefited both the White House and major tech companies.
Discussions between Canada and the U.S. have also included the potential easing of substantial tariffs imposed by Trump. He has enacted 50 percent tariffs on steel and aluminum, as well as 25 percent tariffs on automobiles, alongside a 10 percent tax on imports from numerous countries, with the possibility of increasing rates on July 9 after a 90-day negotiating period.
Canada and Mexico are also facing tariffs of up to 25 percent initiated by Trump under the pretext of combating fentanyl smuggling. However, some products remain protected under the 2020 U.S.-Mexico-Canada Agreement established during Trump's first term.
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