After US President Donald Trump surprised the Canadian people and the Canadian government by suspending all commercial negotiations between the two countries, and threatened to impose additional high customs duties within seven days if Canada did not retract from imposing digital services tax on American technology companies, Canada canceled its decision yesterday and retracted the imposition of the tax that was estimated at 3 %, and it was scheduled to start collecting it today.
Repeated anger from Trump
A week ago, Francois Philip Champin, Canadian Finance Minister, said that he would not delay the implementation of the digital services tax – which applies to any technology company that earns more than $ 15 million from Canadian Internet users – even as American commercial talks continue.
For its part, a group of pressure for some American technology giants said that the tax, which is applied retroactively until 2022, will cost it up to 3 billion dollars, provided that these payments begin on June 30.
Trump posted on Truth Social as a tweet saying that he decided to stop all commercial talks with Canada, and referred to Canada as “a country that is difficult to trade with” and said that the tax on technology companies- which deserves the first batch today, Monday, June 30 “is a direct and crying attack on our country.”
“Based on this terrible tax, we end all discussions about trade with Canada, in effect immediately. We will tell Canada about the customs tariff that will push it to carry out business with the United States during the next seven -day period,” Trump added.
Some analysts considered that Canada avenges the new fees imposed by the Trump administration on steel imports recently by 50% and negatively affected Canadian iron and steel manufacturers. This prompted the Canadian Finance Minister to say that his government is working to protect its industry from “unjust American definitions”, and the Canadian government said it “is still ready to take additional steps as needed.”
The importance of Canadian American trade
Canada is the second largest commercial partner for the United States, while America is the largest trade partner of Canada. The long land borders between the two countries and the societal and linguistic similarities facilitate the facilitation of commercial transactions between them.
The American Statistical Office data indicates that in 2024, the total commodity trade between the United States and Canada estimated about 762 billion dollars. US commodity exports to Canada amounted to 349 billion dollars, while imports from Canada amounted to 413 billion dollars. This led to an American trade deficit in commodities of $ 63 billion. At the same time, the services trade with Canada is estimated at $ 140 billion, with a surplus of the United States of $ 32 billion.
The United States is currently applying a 25% customs tariff rate to Canadian imports that are not compatible with the United States, Mexico and Canada Agreement, the commercial deal that Trump signed during his first term before he turned it with a wave of customs tariff advertisements in his second term.
The 25% American customs tariffs are excluded on Canadian commodities, energy products, which are subject to 10%. Canada is also strongly affected by the Trump tax by 50% on steel and aluminum imports, and the country is the largest foreign resource for these materials to the United States.
It was also affected by the 25% fees that Trump imposed on vehicles and foreign -made auto parts. For his part, Treasury Secretary Scott Bessent told CNBC that the Trump administration hopes to “stop the Carney government tax as evidence of goodwill.”
After Bessent announced, hours before Trump announced the opening of the White House to postpone the previously announced deadline to reach new trade agreements from July 9 to Labor Day corresponding to September 1, and said that the fees on each country separately are negotiable.
The position of American technology companies
The first payments from the Canadian digital services tax, which was enacted last year, were scheduled to start retrospectively until 2022, today, Monday.
The tax will affect Canadian and foreign technology companies, including giant American companies such as Amazon, Google, Meta, and others. At the same time, Canadian officials said this month that they will not temporarily stop the digital services tax, despite the fierce opposition from Trump.
The Computer and Communications Industry Association (CCIA), which represents technology companies, the American commercial representative, urged the launch of an investigation according to the 301th department, warning that the tax may cost American companies between 900 million dollars and 3 billion dollars annually, which will cause the loss of more than 4 thousand jobs in these companies.
The association described that the Canadian decision is mainly targeting American companies in particular.
In addition to its demand for investigation, American companies, headed by Google, took a step by imposing additional fees by 2.5% on the advertising services provided in Canada, as a way to pass an additional cost for Canadian advertisers. At the same time, reports indicate that other companies such as Amazon may apply similar additional fees to Canadian customers.
Jameson Jarir, the American commercial representative, is now expected to start an investigation into the unfair commercial practices under section 301 of the 1974 Trade Law to determine the amount of damage the new Canadian Canadian taxes to the United States.
The Canadian decision came and Trump’s sharp reaction came to highlight the differences of the two neighboring countries over trade, and other issues. On several occasions, Trump has repeated that Canada should become the 51st state and join the United States.
