Canada’s digital services tax is in Donald Trump’s crosshairs.
The U.S. president signed a presidential memorandum Thursday afternoon calling for a “fair and reciprocal” trading plan, and one of his targets is Canada’s digital services tax.
“Though America has no such thing, and only America should be allowed to tax American firms, trading partners hand American companies a bill for something called a digital service tax,” a White House fact sheet on Trump’s memorandum said, adding that France and Canada collect $500 million (U.S.) a year in DST from American firms. The memo gives U.S. trade officials 180 days to study trade and come up with a plan for reciprocal tariffs.
The DST imposes a three per cent tax on digital service companies with more than $20 million of revenue from Canadian sources. While it officially became law last year, the first payments aren’t due until this June, and will be retroactive to 2022.
In a wide-ranging White House press conference, Trump also took shots at Canada’s NATO contributions, and argued that Russia should be readmitted to the G7.
“I was arguing with Trudeau, I was arguing with other people,” Trump said of the then-G8’s decision to eject Russia in the wake of its invasion of Ukraine. Trump also said Canada needs to raise its contributions to NATO.
“Canada’s just about the lowest payer in NATO,” Trump said.
Canada ranks 27th among 32 NATO member countries, according to NATO’s statistics on whether states are meeting the target of spending 2 per cent of GDP on defence.
Other countries, regions and products also made it into the fact sheet about Trump’s trade memo, ranging from EU seafood to ethanol from Brazil.
The DST has long been a target of U.S. ire, and has come under criticism from Canadian business organizations as well.
“We’ve been raising alarms about the DST for months,” said Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce.
Trump is also disrupting international trade more broadly, said Holmes, which will hurt trade-dependent economies, including Canada’s.
“This won’t be good for anyone. It’s pretty clear that this will cause a broad-based tariff war,” said Holmes. “It’s clear that he’s weaponizing trade uncertainty — that’s very clear, and that is damaging.”
“TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!!” Trump posted on his social media site, Truth Social Thursday morning. “MAKE AMERICA GREAT AGAIN!!!”
In his press conference, Trump said he had planned to impose broad-based tariffs during his first term in office, but held off because of the global COVID-19 pandemic.
“I was getting ready to do this years ago, but then COVID hit. … I’ve got a big heart,” said Trump.
Trump is meeting Thursday with Indian Prime Minister Narendra Modi. While Modi has long been an admirer of Trump’s, India already has widespread tariffs of 10 per cent on American imports.
Earlier this week, Trump signed an executive order imposing 25 per cent tariffs on all steel and aluminum imports as of March 12. He later said they’d be on top of 25 per cent tariffs already scheduled to take effect on all imports from Canada and Mexico scheduled to take effect March 4.
Earlier this month, Trump said he was upset with Canada’s agricultural sector and the country’s supply-managed dairy sector.
“Canada is very tough. They’re very, very tough to do business with, and we can’t let them take advantage of the U.S.,” Trump said. “They don’t take our agricultural product for the most part, our milk and dairy, etc. A little bit they do, but not much. We take theirs.”
Trump’s nominee for commerce secretary, Howard Lutnick, also specifically mentioned Canada’s dairy sector during his Senate confirmation hearings.
“Canada … treats our dairy farmers horribly. That’s got to end,” Lutnick said.
The U.S. has accused Canada of not living up to its commitments under the 2018 Canada-U.S.-Mexico Agreement to give American producers access to 3.5 per cent of this country’s dairy market.
More to come.
With files from Tonda MacCharles
