In a recent announcement, U.S. President Donald Trump declared an end to trade negotiations with Canada, a move he labeled as a response to new taxes affecting U.S. tech companies. He indicated that Ottawa would be informed of the updated tariff rates within a week.
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President Trump was specifically addressing Canada’s digital services tax, which was introduced last year and is projected to generate approximately Can$5.9 billion (US$4.2 billion) over the next five years. As noted by the Computer & Communications Industry Association, while this tax isn’t new, U.S. service providers may face substantial financial obligations as this tax comes into full effect by June 30.
The 3% tax primarily targets large multinational companies, including giants like Alphabet, Amazon, and Meta, which provide digital services to Canadian consumers. Washington has sought dispute resolution discussions regarding this matter in the past.
Although Canada has avoided some of President Trump’s broad tariffs, it still navigates a complex landscape of other trade levies. The President has implemented significant tariffs on imports of steel, aluminum, and automobiles. Last week, Canadian Prime Minister Mark Carney mentioned that Canada would adjust its counter tariffs—currently set at 25% on U.S. steel and aluminum—in light of an upcoming decision regarding a bilateral trade agreement, which he noted would need resolution within 30 days. “We will continue to conduct these complex negotiations in the best interest of Canadians,” Mr. Carney stated, emphasizing the importance of open dialogue, even as he acknowledged he had not spoken with President Trump that day.
Echoing sentiments from the U.S. side, U.S. Treasury Secretary Scott Bessent expressed hope that Canada would reconsider the digital tax as a gesture of goodwill. However, he now anticipates that U.S. Trade Representative Jamieson Greer will initiate an investigation into the potential damages posed by Canada’s tax framework.
In a broader international context, President Trump’s tough stance on Canada comes on the heels of new agreements made between Washington and Beijing regarding trade. Notably, ensuring a steady supply of rare earth elements critical for various products—including electric vehicles and defense equipment—has been a top priority for U.S. negotiators. China, which holds a dominant position in global production of these materials, recently implemented export licensing requirements, perceived as a reaction to the U.S. tariffs.
Following discussions in Geneva, both nations agreed to lower retaliatory tariffs temporarily on one another’s products. Moreover, China pledged to alleviate some non-tariff barriers; however, U.S. officials later claimed that Beijing did not fully adhere to these commitments. Recent conversations in London led to a framework aimed at progressing the Geneva agreement, with a White House official stating the nations had “agreed to an additional understanding for a framework to implement the Geneva agreement.”
Under the new terms, China will review and expedite applications for export control items that meet legal requirements, and in return, the U.S. is expected to lift certain restrictions against China.
Looking ahead, numerous economies, excluding China, face a July 9 deadline for implementing higher tariffs, escalating from the current 10%. As negotiations continue, it remains uncertain if these economies will reach agreements to mitigate impending tariffs. During discussions about the European Union, President Trump was quoted saying, “We have the cards. We have the cards far more than they do.”
Meanwhile, Secretary Bessent indicated that the U.S. aims to finalize its trade agenda by September, suggesting that further agreements could be on the horizon. “If we can ink 10 or 12 of the important 18,” he remarked, “we could have trade wrapped up by Labor Day.” As the market reacted positively to the latest U.S.-China trade developments, Wall Street’s major indices recorded new highs despite ongoing uncertainties around Canada.
Edited By Ali Musa
Axadle Times International – Monitoring.
