Trump terminates trade talks with Canada over tax on digital companies

Washington: US President Donald Trump said he would immediately cease trade negotiations with Canada and decide on a tariff rate within seven days after being informed Canada would proceed with a “digital services tax” that applies to American tech companies.

The announcement marks a resumption of hostilities between the two North American neighbours after their relationship improved under the leadership of Canadian Prime Minister Mark Carney, a former banker elected in late April who struck a chord with Trump.

US President Donald Trump and Canadian Prime Minister Mark Carney at the G7 summit in Canada on June 16.Credit: AP

It also underlines the Trump administration’s deep distaste for measures it regards as discriminatory imposts on American tech giants, such as Australia’s News Bargaining Code. The policy charges Google, Meta and others for their use of media content, and has been a point of contention in trade talks between Canberra and Washington.

Canada confirmed a week ago that it would proceed with its digital services tax as passed by parliament despite ongoing negotiations with the US. It is a 3 per cent levy on revenue earned from Canadian users and will apply to companies such as Amazon, Uber and Airbnb, along with the aforementioned firms.

The levy, due to start June 30, will apply retroactively to January 2022, with US companies facing a $U2 billion ($3.1 billion) bill, according to Canadian newswire The Canadian Press. It applies to companies that produce Canadian revenue above $C20 million a year and global revenue above €750 million.

The previous US administration under Joe Biden also took issue with the planned tax.

Trump called Canada “a very difficult country to trade with” and labelled the digital services tax “a direct and blatant attack on our country”.

“Based on this egregious tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” he posted on Truth Social. “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.”

Later, in the Oval Office, he told reporters the US holds “all the cards” and would cease talks with Canada “until they straighten out their act”. He accused the country of copying the digital services tax of the European Union, which the Trump administration also opposes.

“Economically, we have such power over Canada,” he said. “It’s not going to work out well for Europe either, and it’s not going to work out well for Canada. They were foolish to do it.”

Canada’s public broadcaster CBC reported Carney said he had not yet spoken to Trump since the president made the announcement, and ducked a question about whether he would drop the tax. “We’ll continue to conduct these complex negotiations in the best interest of Canadians,” Carney was quoted saying.

Prime Minister Anthony Albanese explained Australia’s News Bargaining Code to US officials while at the G7.Credit: Alex Ellinghausen

Australian Prime Minister Anthony Albanese has vowed to defend Australia’s News Bargaining Code and said he discussed it with US Treasury Secretary Scott Bessent and other officials when they met at the G7 summit in Canada last week.

“I explained the position of what it is – that it’s not something that produces revenue for the government,” Albanese told reporters after the meeting.

“We think it is important. I outlined what the issues were and are with that, and why we believe it should be given support. Importantly, it’s not a tax paid to the government. It’s not something that produces revenue for us. Indeed, it produces revenue for you and the people in this room. And I think that’s an important part of a democracy going forward.”

The Trump administration says it is negotiating trade deals with trading partners after introducing, and then pausing for 90 days, so-called reciprocal tariffs in early April. That includes Australia, for which the tariff rate was set at 10 per cent. But separately, Australian steel and aluminium is also subject to a 50 per cent tariff.

The 90-day deadline is due to expire on July 9, although the administration has recently indicated it is flexible, and Bessent said he hoped to conclude about a dozen deals with the US’s most important trading partners by the start of September – a much longer timeframe than initially envisioned.

Asked about the July deadline at a press conference on Friday (Saturday AEST), Trump suggested it was meaningless.

“We can do whatever we want,” he said. “We could extend it, we could make it shorter. I’d like to just send out letters to everyone saying, ‘Congratulations, you’re paying 25 per cent’.”

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