TMTPOST -- U.S. President Donald Trump on Friday abruptly announced he decided to cut off all the trade talks between the country and Canada over upcoming “egregious” digital services tax imposed by Ottawa.
Credit：Xinhua News Agency
In a post on his social media Truth Social, Trump slammed the digital services tax that Canada is going to levy on U.S. tech firms, calling it a “direct and blatant attack on our country.” Calling Canada “a very difficult country to trade with”, Trump said the neighbouring nation has charged U.S. farmers as much as 400% tariffs for years and its latest move to impose digital services tax is “obviously copying the European Union”, while the latter is now under negotiation with the U.S.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canad, effective immediately,” Trump wrote, suggesting his administration is readying the new tariff rates for Canada. “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,” the president said in the post.
Following Trump’s announcement, U.S. Treasury Secretary Scott Bessent said the administration could launch a tariff investigation against Canada in the face of the looming digital services tax. Bessent told CNBC his inclination is that the U.S. Trade Representative’s office will open a tariff probe under Section 301 of the Trade Act of 1974. For Bessent, such action is “more durable, and could last longer” than tariffs based on the International Emergency Economic Powers Act, which Trump used for his so-called reciprocal tariffs unveiled on April 2, a date Trump proclaimed “Liberation Day”.
Canada’s Digital Services Tax (DST) was enacted in June 2024 under former Prime Minister Justin Trudeau’s government. The federal tax is applicable to large businesses — both foreign and domestic — that meet two specific criteria: a total global revenue of €750 million and up in a fiscal year of the group that ends in the previous calendar year, and over C$20 million ($14.6 million) of profits earned in Canada in the particular calendar year.
The legislation levies a 3% tax on digital services revenue over $20 million, and is retroactive to Jan. 1, 2022. Taxable revenue includes those of online marketplaces, digital advertising, social media, and user data — which will primarily affect American Big Tech giants such as Amazon.com, Inc., Apple Inc., Google and Meta Platforms, Inc. These companies have to pay DST equal to 3% of the digital services revenue that they make from Canadian users above C$20 million annually.
The filing deadline for foreign and domestic taxpayers with a DST filing obligation for any of the 2022, 2023 or 2024 calendar years is June 30, next Monday, according to the guide and instructions released by the Canada Revenue Agency. Canada and the United States have been in negotiations to get Trump to lift the tariffs on Canadian goods, which have already led to major economic shrinking.
Canada’s Finance Department confirmed on Thursday the first payment for its DST is still due Monday, despite a Group of Seven (G7) agreement that resulted in removing the Section 899 “revenge tax” proposal from Trump’s tax bill. Keeping the digital tax will not affect the G7 agreement, which focuses on global minimum taxes, the Finance Department said.
Canadian Prime Minister Mark Carney on Friday called the negotiations with the United States "complex" in response to Trump’s announcement of terminating all trade talks with Canada with potential new tariffs."We'll continue to conduct these complex negotiations in the best interest of Canadians," Carney said to local media. "It's a negotiation."
Canadian Finance Minister Francois-Philippe Champagne last week suggested that the digital tax may be renegotiated as part of US-Canada trade discussions. “Obviously, all of that is something that we’re considering as part of broader discussions that you may have,” he spoke with reporters.
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