Donald Trump’s brash threats of additional tariffs are back in full force.
The U.S. president said on social media he’s ending all trade talks with Canada and within a week will unveil new tariffs “that they will be paying to do business with the United States of America.”
His reason? The digital services tax.
If you don’t know what that is, you’re not alone. Here’s what you need to know.
What is the digital services tax?
The digital services tax is set to take effect for the first time on Monday.
It will hit big tech companies around the world, including American companies like Amazon, Google, Meta, Uber and Airbnb, with a three per cent tax on revenue from Canadian users.
The tax officially became law last year and is retroactive to 2022, but the first payments aren’t due until the end of June. That means U.S. tech companies have a $2 billion (U.S.) bill due at the end of the month, according to The Canadian Press.
The independent Parliamentary Budget Officer reported in 2023 that the tax would raise about $1.2 billion per year in government revenues.
The tax has been long planned by the Liberal government, first promised in the 2019 election and delayed for years.
Why doesn’t Trump like it?
In his Truth Social post, Trump said the tax is a “direct and blatant attack on our country.”
“They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also,” Trump wrote.
Because of the tax, Trump said he is terminating all trade discussions with Canada.
Trump has previously lashed out against the tax. In a fact sheet released in February, the White House said “only America should be allowed to tax American firms.”
And the opposition didn’t start with Trump. Last year, under the Biden administration, the Office of the United States Trade Representatives said it would do what’s necessary to halt the digital services tax.
Could Canada get rid of it?
The digital services tax has faced increasing criticism in the U.S. and Canada. Last year, a group of Congress members called on the former Joe Biden administration to respond to the tax, saying it “seeks to erode the durability of our bilateral economic relationship” and would “uniquely target our firms and workers.”
A group of Canadian business organizations, including the Canadian Chamber of Commerce, Retail Council of Canada and Canadian Bankers Association, released a letter earlier this month that said the tax could result in U.S. retaliation that could hurt Canadian pension funds and investments.
“The negative impact of this measure cannot be understated for the Canadian economy,” the letter said, calling for the tax to be paused.
What does Mark Carney’s government have to say?
The Prime Minister’s Office responded with a short statement Friday afternoon that expressed Canada’s desire to continue the trade talks but did not mention the digital services tax.
“The Canadian government will continue to engage in these complex negotiations with the United States in the best interest of Canadian workers and businesses,” the statement said.
Last week, finance minister François-Philippe Champagne said Canada is “going ahead” with the tax.
“The (digital services tax) is in force and it’s going to be applied,” he told reporters on Parliament Hill.
With files from Alex Ballingall and The Canadian Press
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