Trump wants Canada's digital services tax gone before trade talks resume

ruff says he's conclusion 'all discussions on merchandise with Canada' efficacious immediately

U.S. President Donald Trump says he's ending all trade discussions with Canada while signalling he may impose a blanket tariff to hit back at Ottawa for imposing a tax on web giants.

"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 a social media post Friday.

Canada and the U.S. Have been locked in negotiations to get Trump to lift his punishing tariffs on Canadian goods, levies that have already led to major economic dislocations, job losses and a drop in southbound exports. Trump and Prime Minister Mark Carney agreed at the G7 last week to reach some agreement on the trade dispute within 30 days — a timeline that is now very much in doubt.

Trump says he's pulling back from the bilateral trade discussions because Canada plans to move ahead with its digital services tax (DST), which requires major web companies to pay a special tax.

How much Canada's digital service tax will cost U.S. Tech companies

Speaking later in the Oval Office, Trump said the U.S. Has "such power over Canada," and that he's upset the country is following a taxation strategy similar to Europe's.

"It's not going to work out well for Canada. They were foolish to do it," he said of the DST, which was first passed into law last year with a delayed application.

Asked if there's anything Canada can do to appease him, Trump said Ottawa could remove the tax.

"They will," he said. "They do most of their business with us. When you have that circumstance, you treat people better."

Speaking briefly to reporters while leaving his office earlier Friday, Carney said he had not spoken to Trump since the president's post.

"We'll continue to conduct these complex negotiations in the best interest of Canadians," Carney said. He did not address a reporter's question about whether his government is prepared to drop the DST — something the Business Council of Canada is calling on Ottawa to do in exchange for U.S. Tariff relief.

Set to take effect on June 30, the DST would have U.S. Companies like Amazon, Google, Meta, Uber and Airbnb pay a three per cent levy on revenue from Canadian users. The policy will apply retroactively, leaving U.S. Companies with a $2-billion US bill due at the end of the month.

These global digital firms are often able to skirt paying taxes in the countries where they operate, and the last Liberal government pitched the DST as a way to bring the tax code up to date and capture revenues earned in Canada by firms located abroad.

It's been a bone of contention between Canada and the U.S. For years, with former president Joe Biden's ambassador to Canada warning during his tenure that, if a DST was enacted, the U.S. Would hit back.

While Canada and other Organization for Economic Co-operation and Development (OECD) countries had been discussing some sort of global DST, the Trudeau government decided to move ahead with its own tax rather than wait for co-ordinated action.

Carney's finance minister, François-Philippe Champagne, said last week Ottawa planned to push ahead with the tax even while negotiations with Trump and his tariffs are ongoing.

That's what's prompted the president's ire. 

"We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country," Trump said.

As he has done in the past, Trump mischaracterized Canada's tariff regime on U.S. Dairy products.

The high tariff rates Trump frequently cites are only applied if U.S. Exports exceed a set "tariff-rate quota," something that has never happened.

Trump's own Department of Agriculture noted earlier this year that almost all agricultural products traded between the United States and Canada are free of tariffs.

Anand said that despite Trump's threats, Canada will push ahead with trying to broker a deal that's in the best interest of workers and businesses, "while at the same time ensuring we diversify our supply chains so we are never again dependent on one economy."

She touted the New EU-Canada Strategic Partnership of the Future that Carney brokered with the European Union earlier this week.

Trump's abrupt decision to call off negotiations may have caught Canadian officials off guard.

Still, Candace Laing, president of the Canadian Chamber of Commerce, said there have been signs the "tone and tenor of talks has improved in recent months." Trump and Carney have had two friendly meetings in that time, and she hopes to see "progress continue" despite Trump's apparent attempt to derail the talks.

"Negotiations go through peaks and valleys. With deadlines approaching, some last-minute surprises should be expected," Laing said.

Senior reporter

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