Trump halts trade talks over Canada's digital services tax
What's the story
United States President Donald Trump has announced an immediate halt to all trade talks with Canada. The decision was revealed on his social media platform, Truth Social. The move comes in response to Canada's Digital Services Tax (DST), which was enacted last year and is retroactive to January 1, 2022, but companies will start paying from June 30, 2025. The tax is expected to hit major US tech companies and e-commerce platforms hard.
Tax details
What is Canada's digital services tax?
The DST imposes a 3% tax on revenue from certain digital services that depend on user engagement, data, and content contributions. It targets companies with global revenues of €750 million or more and Canadian digital services revenue exceeding CAD 20 million. The tax is retroactive to January 1, 2022, but will only be payable from June 30, 2025.
Tax justification
Canada defends DST; US finds it discriminatory
Canada defends the DST by arguing that foreign companies making huge profits off Canadian users should pay a part of those earnings. The tax is expected to bring in around $875 million annually for Canada, totaling CAD 7.2 billion over five years. However, the US Trade Representative (USTR) has previously found such taxes discriminatory against American firms and proposed retaliatory tariffs on countries with similar taxes.
Tax opposition
US Chamber of Commerce slams DST as 'discriminatory'
The US Chamber of Commerce has slammed the DST as "discriminatory" and against international tax principles. They argue it violates Canada's obligations under the United States-Mexico-Canada Agreement (USMCA) and World Trade Organization rules. Earlier this month, Canadian Finance Minister Francois-Philippe Champagne said Parliament had passed the DST and the government would proceed with its implementation despite US opposition.
Fallout
What US could do
While France, Italy, Spain, and the United Kingdom all have tax regimes in place, the US is mulling drastic steps. Trump has described the move online as "a direct and blatant attack on our country." Meanwhile, large companies such as Amazon, Apple, Airbnb, Google, Meta, and Uber will be taxed at three percent on the money they earn from Canadian users and customers.