Trump Halts Canada Trade Talks Over Tax on US Tech Giants
In a sudden move on Friday, President Donald Trump announced that the United States would immediately suspend all the ongoing trade negotiations with Canada.
The decision comes in response to Canada’s plan to begin collecting digital service taxes from major US technology companies.
From now onwards we the United States are not going to trade any kind of business, exports with Canada. It is a very hard kind of thing to trade with them because of their leverages and tariffs, they charged our Farmers as much as 400%, for years.
They are putting services taxes on Dairy Products, and just announced that they’re putting a Digital Service tax on American Companies which is a direct and “blatant attack” on the American’s.
Calling the tax a “blatant attack” on American businesses. Trump took to social media to declare his intention to notify Canada within a week of new tariffs it would face for doing business with the US.
This development puts a sharp stain on what had appeared to be a slowly recovering relationship between the two nations– historically close allies and strong trading partners. Tensions had been easing under Canada's new Prime Minister, Mark Carney, with both sides hinting at the possibility of a fresh trade arrangement during the recent G7 summit in Alberta.
But Trump’s latest remarks have thrown those hopes into disarray.
“We hold all the cards”, Trump said from the Oval Office. “Economically, we have overwhelming leverage over Canada.”
Canadian officials have yet to formally respond, though Carney’s office issued a statement reaffirming Canada’s commitment to pursuing negotiations that safeguard the interest of Canadian workers and businesses.
Source: The Truth
What’s Behind the Conflict?
At the heart of the dispute is a 3% digital services tax that Canada introduced last year, targeting revenues from online advertising, user data sales, and other digital services.
The law is retroactive, meaning US tech companies like Google, Amazon and Apple are expected to pay nearly $2.7 billion starting Monday.
American lawmakers, both Republican and Democrat, have criticized such taxes as discriminatory against US firms. While other countries– particularly in Europe– have implemented similar levies, the Canadian version is now front and center in this transatlantic standoff.
Trump did take a jab at European nations, calling their tax policies, “Very Nasty”, but stopped short of threatening an end to negotiations with the European Union.
Economic Fallout Looms
If Trump follows through with imposing new tariffs, the economic consequences could be significant. Higher impact costs would likely hit US consumers and businesses hard, particularly in industries tied closely to cross border trade.
Though Wall Street briefly reacted to the news, the S&P 500 eventually rebounded and closed at a record high in yesterday 's session.
Source:WSJ
Currently Canadian exports to the US already face a 25% tariff unless covered under a previous trade agreement negotiated during Trump’s first term. Steel and aluminium exports are also taxed at 50%.
Trump often floated tariff threats as bargaining tools, sometimes backing down when markets reacted negatively.
President Trump has frequently approached plans to punish other countries with high level levies, only to later back down, but if the markets panic over the interruption to commerce become more immense.
The newest threat by President Donald Trump has arrived just the week before, he is expected t0 re-impose the higher traffics on with every trading partner– which is a set of so-called “reciprocals” rates that he first announced, and quickly suspended, in early April.
Canada Holds Its Ground
Despite mounting pressure, Canada’s government has remained firm. Finance Minister François- Philippe Champagne said last week that the counter tax part was explained to the American Government by the Canadian Government in a “fairly long, extensive discussion” at the G7 Summit , and previously during the meeting in Washington.
Meanwhile, efforts by the Trump administration to introduce a retaliatory “revenge tax”-- targeting companies from countries imposing such levies – have largely fizzled out after opposition from investors.
Treasury Secretary, Scott Bessent urged Congress to drop the plan, citing an agreement with developed economies to avoid overlapping tax burdens on US Firms.
Still, the broader international agreement on corporate taxation, shaped by the G7, does not cover digital services taxes– keeping the Canada-Us friction very much alive.
Beyond Digital Taxes
While the digital tax is the flashpoint, it’s far from the only tension point in US- Canada trade relations. Trump has previously voiced frustrations over Canadian regulations on the Farmers, dairy products and banking industries up to 400% tariffs and even made controversial comments suggesting Canada should consider becoming the 51st US state – an idea Canadian traders have finally rejected.
He also floated the idea of including Canada in the US air defence system, dubbed the “Golden Dome” in exchange for a $71 billion contribution– a proposal not well received in Ottawa.
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