Your guess is as good as ours as to whether Canada will face broad-based tariffs from south of the border, but the U.S. is moving closer to striking a blow against countries that tax its tech giants.
What happened: President Donald Trump signed a memo ordering U.S. officials to look into retaliating against countries that impose digital services taxes on U.S. tech companies, including Canada.
- Canada’s digital services tax (DST), adopted last year, levies a 3% charge on the revenue earned in Canada by large tech companies.
- The federal government argued the DST was a response to tax avoidance strategies used by many global tech companies that lack a physical presence in Canada.
Why it matters: Canada would likely sacrifice the DST (and the estimated $1 billion in revenue it’s expected to generate) to stabilize the trade relationship with the U.S., but other practices the White House considers unfair may be more difficult to jettison.
- Canada’s supply management system for dairy and poultry, which Trump has already complained about, could be targeted by the U.S. as another “non-reciprocal trading arrangement” — scrapping it would be much more politically fraught than ditching the DST.
Zoom out: It’s not just Canada that’s in the crosshairs of the White House’s latest trade announcement — 30 countries, including France, India, and the U.K., have either adopted or are in the process of implementing digital service taxes of their own.—TS