logo
Digital services tax sparks new trade dispute as US halts talks with Canada

Digital services tax sparks new trade dispute as US halts talks with Canada

US President Donald Trump on Friday halted all trade negotiations with Canada over Ottawa's new digital services tax, which will affect American tech giants. Trump described the tax as a 'blatant attack' on the United States, escalating political tensions amid his ambitions to potentially annex Canada.
'Based on this egregious tax, we are hereby ending all trade discussions with Canada, effective immediately,' Trump wrote on his Truth Social platform. 'We will be notifying Canada of the tariffs they will be paying to do business with the United States within the next seven days.'
Trump has repeatedly expressed his opposition to digital services taxes during trade negotiations with other countries, viewing them as a 'non-tariff trade barrier.'
Canada's new digital tax is scheduled to take effect next Monday and will be applied retroactively from 2022.
In response, Canadian Prime Minister Mark Carney said Friday that he still wishes to continue negotiations with the United States. 'We will continue to conduct these complex negotiations in the best interest of Canadians. These are negotiations,' he told reporters.
US Treasury Secretary Scott Bessent commented on CNBC on Friday, stating, 'We knew it was coming, and we were hoping it would not be implemented.' He added, 'We think it's fundamentally unfair to make it retroactive. This is a Trudeau-era issue, so we were hoping as a sign of goodwill that the new Carney administration would at least hold off on this tax during trade negotiations. But apparently, they did not.'
Bessent indicated that if the Canadian government proceeds with the tax, Trump is prepared to impose higher tariffs on all Canadian goods, without specifying the rate.
Canada is the largest buyer of American goods, importing $349bn worth last year, according to US Department of Commerce data. In turn, Canada exported $413bn in goods to the US, making it the third-largest source of foreign goods for the American market. The imposition of higher tariffs could provoke retaliatory measures from Canada, which some estimates suggest would cause economic harm to both nations.
What is the Digital Services Tax?
The government of former Prime Minister Justin Trudeau passed Canada's Digital Services Tax Act in June 2024, with its rules coming into effect the same month.
The federal tax applies to large foreign and domestic companies that meet two specific criteria: total global revenues of €750m or more, and annual earnings exceeding $20m from Canadian sources.
The legislation imposes a 3% tax on digital services revenue exceeding $20m. It applies retroactively to January 1, 2022, which according to some estimates, means Ottawa could collect billions of dollars.
Taxable revenues include earnings from online marketplaces, digital advertising, social media, and user data, which will primarily affect US tech giants such as Amazon, Apple, and Meta Platforms.
Pierre Poilievre, leader of the Conservative Party of Canada, wrote in a social media post that he hoped both sides would return to the negotiating table: 'I am disappointed that trade talks have stalled. Hopefully they will resume soon.'
Several Canadian companies and groups have expressed concern about proceeding with the tax, fearing an escalation of trade tensions with the US
Why is Canada Imposing This Tax?
A primary reason is to increase revenue. The Parliamentary Budget Office estimated last year that the tax would generate more than C$7bn over five years.
The Liberal Party of Canada, under former Prime Minister Justin Trudeau, had promised to introduce the tax during the 2019 federal election. However, its implementation was delayed for several years as a number of countries hoped to reach a unified international digital tax plan. As delays continued, Canada decided to proceed with its own plan.
In addition to raising revenue, Ottawa is promoting the tax as a way to modernise its tax system to include profits generated within Canada by foreign companies that do not have a physical presence in the country, according to the Toronto Star.
What is the US Position on the Tax?
The United States has strongly opposed the tax from the outset because it primarily affects American tech giants.
US officials have argued that the tax discriminates against American companies. In a rare display of unity, both Democrats and Republicans in Congress have rejected Canada's plan and have been united in their criticism.
Early in his second term, Trump had threatened to impose a 25% tariff on all Canadian exports, with the possibility of raising it further for some products. To date, most Canadian goods remain exempt from these tariffs, provided they comply with the United-States-Mexico-Canada Agreement (USMCA), which Trump negotiated during his first term.
The most notable exceptions have been a 25% tariff on all foreign cars and parts, steel, and aluminum. Trump later doubled the tariffs on steel and aluminum imports to 50%. Canadian goods not compliant with the USMCA faced combined tariffs of 50%.
In response to the auto tariffs, Canada imposed a 25% tariff on non-compliant US cars. It also retaliated against Trump's original steel and aluminum tariffs by imposing a 25% tariff on nearly $43bn of US goods, including alcoholic beverages, sports equipment, and home appliances.
Despite Trump's latest tariff threats, US markets ended Friday on a high note. The S&P 500 and Nasdaq, which dipped slightly after Trump's post, rose 0.52% to close at record highs. The Dow Jones Industrial Average also climbed 432 points, or 1%.
Why is Canada Not Delaying the Tax Amid Trade Tensions?
Although Canadian and American business groups, organisations representing US tech giants, and several US lawmakers have signed letters in recent weeks calling for the tax to be repealed or at least postponed, Canadian Finance Minister François-Philippe Champagne has stated that the law has been approved by Parliament and that Canada will move forward with its implementation.
The Canadian Chamber of Commerce has argued that the tax could increase costs for consumers and risks 'damaging our mutually beneficial trading relationship with the United States.'
'In an effort to get trade talks back on track, Canada should immediately offer to repeal the Digital Services Tax in exchange for the removal of tariffs from the United States,' Goldy Hyder, the Chamber's President and CEO, told Bloomberg.
How Could the United States Respond?
Trump said he would withdraw from bilateral trade negotiations because Canada intends to proceed with the digital services tax, calling the move 'a direct and blatant attack on our country.' This has cast doubt on whether a 30-day deadline to reach an agreement in the trade dispute can be met.
The previous administration of President Joe Biden also opposed the tax but sought to resolve the dispute differently. In August 2024, it requested dispute settlement consultations with Canada under the Canada-United States-Mexico Agreement (CUSMA).
The US has said that American companies are obligated to pay Ottawa $2bn under the digital services tax. In a statement issued in February, Trump said, 'America alone should be allowed to tax American companies.'
In response to the Canadian rules, tech giant Google is imposing an additional 2.5% fee on advertisements shown in Canada, effective October 2024. Google stated that the surcharge, named the 'Canada DST Fee,' will cover 'a portion of the costs of complying with Canada's DST legislation.'
Do Other Countries Apply Similar Taxes?
Yes. France, Italy, Spain, and the United Kingdom, among others, all have such tax systems.
According to the Tax Foundation Europe, about half of the European OECD countries have announced, proposed, or implemented a digital services tax. The United States has met these proposals with threats of retaliatory tariffs.
France's Council of State, which advises the government on draft laws, has referred the country's digital services tax to the Constitutional Council for review, marking the first constitutional challenge to a DST since the legislation was passed in 2019.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Gold Stumbles Against the Dollar… Another Decline Ahead of the U.S. Federal Reserve Meeting
Gold Stumbles Against the Dollar… Another Decline Ahead of the U.S. Federal Reserve Meeting

See - Sada Elbalad

timean hour ago

  • See - Sada Elbalad

Gold Stumbles Against the Dollar… Another Decline Ahead of the U.S. Federal Reserve Meeting

Waleed Farouk Gold prices in the local market recorded a slight decline today, Saturday, during trading, coinciding with the weekend closure of the global exchange, following a marginal 0.4% drop in the international ounce price during the week. This decline came on the back of strong economic data released from the United States, in addition to progress made in trade negotiations between Washington and its partners, which reduced the demand for the precious metal as a safe haven. Gold prices fell by about EGP 15 during today's trading session compared to the close of yesterday's trading, with the price of 21-carat gold reaching the level of EGP 4,620 per gram, while the ounce price on the global exchange declined by about $13 to record $3,337 during the week ending last Friday evening. The price of 24-carat gold reached EGP 5,280, 18-carat gold was recorded at EGP 3,960, 14-carat gold reached EGP 3,080, while the price of the gold pound coin amounted to about EGP 36,960. Prices had ended yesterday's trading session, Friday, with a local decline of EGP 25, as the price of 21-carat gold opened at EGP 4,660 and closed at EGP 4,635, while the ounce price dropped from $3,371 to $3,337. Gold came under selling pressure following the release of strong U.S. labor data, along with progress in trade talks between the United States and the European Union, which was reflected in investor behavior. In addition, the recovery of the U.S. dollar—despite declining Treasury yields—supported this trend, making the metal more expensive for foreign buyers. Economic data released from the United States and the progress made in trade agreements with it affected safe-haven demand, which pushed the yellow metal lower. Furthermore, the U.S. dollar regained some of its strength despite the decline in U.S. Treasury yields. The U.S. Federal Reserve is expected to keep interest rates unchanged at the range of 4.25%–4.50% for the fifth time this year during next week's meeting. Data released throughout the month justified the Fed's stance of maintaining its current policy, after initial jobless claims declined for the fourth consecutive week, highlighting the strength of the labor market. Meanwhile, durable goods orders fell on Friday, driven by a decrease in aircraft orders. Positive trade news emerged since Monday after an agreement between the United States and Japan was announced. Reports of a possible similar deal with the European Union before the August 1 deadline pushed the non-yielding yellow metal below $3,400 per ounce, nearing its weekly low of $3,325 per ounce. In U.S. trade developments, President Donald Trump announced that most trade deals have been finalized, and upcoming statements are expected to determine tariff rates ranging between 10% and 15%. When asked about the possibility of reaching an agreement with the European Union, Trump stated that there is an 'equal' chance of reaching a deal. Gold prices also declined as the U.S. dollar rebounded from its nearly two-week low, making gold more expensive for foreign buyers. Recent news revealed that Trump's visit to the Federal Reserve was not a market-moving event, although it appears he has changed his stance toward Powell. Gold prices fell despite the decline in U.S. Treasury yields, as the 10-year Treasury yield dropped by three basis points to reach 4.386%. As a result, U.S. real yields—which are calculated by subtracting inflation expectations from nominal interest rates—fell by 1.5 basis points to reach 1.936%. On Thursday, better-than-expected initial jobless claims indicated continued labor market strength, even as S&P Global announced a contraction in manufacturing activity. U.S. durable goods orders fell in June, mainly driven by a sharp drop in aircraft demand. Headline orders decreased by 9.6% month-over-month after a 16.5% increase in May. Although the decline was significant, it was smaller than analysts' expectations of a -10.8% contraction. Transportation equipment led the drop, falling by 22.4% in June. However, core durable goods orders—which exclude transportation—rose by 0.2%, indicating some underlying strength in business investment. Interest rate probabilities suggest that the Federal Reserve will maintain current rates, with a 96% chance of no change and a 4% chance of a 25-basis-point cut in the July 30 meeting. Next week's U.S. economic agenda includes the Federal Reserve's interest rate decision on July 30, preliminary second-quarter GDP figures, the release of the Core PCE Price Index, and non-farm payroll data. read more CBE: Deposits in Local Currency Hit EGP 5.25 Trillion Morocco Plans to Spend $1 Billion to Mitigate Drought Effect Gov't Approves Final Version of State Ownership Policy Document Egypt's Economy Expected to Grow 5% by the end of 2022/23- Minister Qatar Agrees to Supply Germany with LNG for 15 Years Business Oil Prices Descend amid Anticipation of Additional US Strategic Petroleum Reserves Business Suez Canal Records $704 Million, Historically Highest Monthly Revenue Business Egypt's Stock Exchange Earns EGP 4.9 Billion on Tuesday Business Wheat delivery season commences on April 15 News Israeli-Linked Hadassah Clinic in Moscow Treats Wounded Iranian IRGC Fighters Arts & Culture "Jurassic World Rebirth" Gets Streaming Date News China Launches Largest Ever Aircraft Carrier Videos & Features Tragedy Overshadows MC Alger Championship Celebration: One Fan Dead, 11 Injured After Stadium Fall Lifestyle Get to Know 2025 Eid Al Adha Prayer Times in Egypt Arts & Culture South Korean Actress Kang Seo-ha Dies at 31 after Cancer Battle Business Egyptian Pound Undervalued by 30%, Says Goldman Sachs Sports Get to Know 2025 WWE Evolution Results News "Tensions Escalate: Iran Probes Allegations of Indian Tech Collaboration with Israeli Intelligence" Arts & Culture Hawass Foundation Launches 1st Course to Teach Ancient Egyptian Language

Trump plays golf in Scotland as protesters rally - International
Trump plays golf in Scotland as protesters rally - International

Al-Ahram Weekly

timean hour ago

  • Al-Ahram Weekly

Trump plays golf in Scotland as protesters rally - International

US President Donald Trump played golf under tight security on the first full day of a visit to Scotland Saturday, as hundreds of protesters took to the streets in major cities. Trump played at his Turnberry resort with son Eric and US ambassador to the UK Warren Stephens, waving to photographers following his arrival in his mother's birth country on Friday evening. His presence has turned the picturesque and normally quiet area of southwest Scotland into a virtual fortress, with roads closed and police checkpoints in place. Police officers -- some on quad bikes and others on foot with sniffer dogs -- patrolled the famous course and the sandy beaches and grass dunes that flank it. Secret Service snipers were positioned at vantage points while some other golfers on the course were patted down by security personnel. The 79-year-old Trump touched down Friday at nearby Prestwick Airport as hundreds of onlookers came out to see Air Force One and catch a glimpse of its famous passenger. The president has professed a love of Scotland, but his controversial politics and business investments in the country have made for an uneasy relationship. Speaking to reporters on the tarmac, Trump immediately waded into the debate surrounding high levels of irregular migration, and lashed out at renewable energy efforts. "You better get your act together or you're not going to have Europe anymore," he said, adding that migration was "killing" the continent. "Stop the windmills. You're ruining your countries," he added. Trump's five-day visit, which is set to mix leisure with business and diplomacy, has divided the local community. Several hundred protesters demonstrated outside the US consulate in the capital Edinburgh and in the city of Aberdeen, near where Trump owns another golf resort. The protests were organised by the Stop Trump Coalition. Participants held placards with slogans like "Scotland hates Trump" and waved Palestinian flags. "I am here because of fascism in America under Trump's rule. I am here because of genocide in Gaza that is being funded and enabled by British and American governments," said 44-year-old Amy Hanlon in Aberdeen. No demonstrations could be seen near Turnberry. Trade talks Not everyone was against his visit. At Prestwick Airport on Friday evening a boy held a sign that read "Welcome Trump" while a man waved a flag emblazoned with Trump's most famous slogan -- "Make America Great Again". "I think the best thing about Trump is he's not actually a politician yet he's the most powerful man in the world and I think he's looking at the best interests of his own country," said 46-year-old Lee McLean, who had travelled from nearby Kilmarnock. "Most politicians should really be looking at the best interests of their own country first before looking overseas," he told AFP. Trump had no public events scheduled for Saturday, but he posted on his Truth Social network to say he was talking with the leaders of Cambodia and Thailand in a bid to end their border conflict that has left at least 33 people dead. Trump is due to discuss trade with EU chief Ursula von der Leyen in Turnberry on Sunday. He is also due to meet UK Prime Minister Keir Starmer, before heading to Balmedie in Aberdeenshire where he is expected to formally open a new golf course at his resort there. Trump is scheduled to return to the US on Tuesday but will be back in the UK for a state visit between 17-19 September, when he will be hosted by King Charles III. Follow us on: Facebook Instagram Whatsapp Short link:

Israel destroys Gaza aid shipments as famine deepens, global pressure mounts to end war
Israel destroys Gaza aid shipments as famine deepens, global pressure mounts to end war

Daily News Egypt

time3 hours ago

  • Daily News Egypt

Israel destroys Gaza aid shipments as famine deepens, global pressure mounts to end war

Amid a worsening famine in the Gaza Strip and an escalating humanitarian crisis caused by Israel's siege and bombardment, Israeli media have revealed that military officers admitted to destroying food, water, and medical supplies from more than 1,000 humanitarian aid trucks abandoned at the Karam Abu Salem crossing. According to Israel's public broadcaster Kan, the convoys carried tens of thousands of relief parcels that were left for weeks under the sun and never distributed, despite repeated warnings from Gaza's Health Ministry of imminent mass deaths due to starvation. UN Secretary-General António Guterres condemned what he described as a 'lack of humanity and compassion' toward Palestinians, warning that Gaza is facing not only a humanitarian disaster but also 'a moral crisis that challenges the global conscience.' In a joint statement on Friday, France, Britain, and Germany demanded an immediate end to the catastrophe in Gaza. 'We urge the Israeli government to lift restrictions on aid deliveries immediately and allow the UN and NGOs to urgently carry out their humanitarian work,' the statement said. The UN World Food Programme also warned that the crisis has reached 'unprecedented levels of desperation,' with one in three people in Gaza going without food for days. On the political front, Hamas rejected claims by US President Donald Trump and his envoy Steve Witkoff that the group had blocked ceasefire negotiations. Hamas official Izzat al-Rishq said such claims contradict assessments from mediators, particularly Qatar and Egypt, who had noted Hamas's 'serious and constructive' engagement. He added that US statements ignore 'the real obstacle to any agreement – Netanyahu's government, which evades commitments and continues its war.' Al-Rishq urged Washington to stop 'whitewashing Israel's actions and providing political and military cover for its ongoing genocide and starvation campaign against over two million people in Gaza.' Trump had accused Hamas of rejecting a ceasefire, even though the group confirmed it submitted a response to mediators reaffirming its commitment to continue negotiations. Israeli Prime Minister Benjamin Netanyahu said his government is working with the US on 'alternatives' to secure hostage releases and end Hamas rule in Gaza. Meanwhile, Egypt and Qatar issued a joint statement confirming 'some progress' in the latest round of talks, while noting a temporary pause to allow for consultations. Egyptian President Abdel Fattah Al-Sisi on Saturday reiterated Cairo's commitment to securing a permanent ceasefire in Gaza, welcoming French President Emmanuel Macron's announcement that France will formally recognise the State of Palestine during the upcoming UN General Assembly in September. The Egyptian presidency said Macron's call and his conversation with Al-Sisi reflect the strength of bilateral ties. UK Prime Minister Keir Starmer also held talks on Saturday with his French and German counterparts, outlining Britain's plans to deliver aid and evacuate injured and sick children from Gaza. A Downing Street statement said Starmer discussed cooperation with partners such as Jordan to air-drop food and evacuate children needing urgent care. The three leaders described the humanitarian situation in Gaza as 'horrific' and called for immediate steps toward lasting peace. However, UNRWA Commissioner-General Philippe Lazzarini dismissed air-drops as inadequate, describing them in a post on X as 'inefficient, expensive, and potentially dangerous to starving civilians.' He stressed that thousands of aid trucks remain stuck in Jordan and Egypt, awaiting clearance to enter Gaza. 'Human-made famine can only be solved through political will,' he added, calling for Israel to lift its blockade and open land crossings so aid can reach people safely and with dignity. Gaza's Health Ministry reported that famine and malnutrition-related deaths have risen to 127, including 85 children, with five more deaths recorded in the past 24 hours. Meanwhile, UNICEF managed to get six trucks carrying vital medical supplies into Gaza hospitals, though no food was included. The ministry emphasized the urgent need for these supplies to keep essential health services operational. In Iran, Sunni scholars in Kurdistan province issued a fatwa declaring 'jihad' to defend Gaza's civilians from what they described as a campaign of genocide and starvation. The ruling was delivered during a mass gathering at the Quba Mosque in Sanandaj, attended by clerics and activists. At the diplomatic level, UN member states are set to renew efforts toward a two-state solution, spurred by France's decision to recognise Palestinian statehood. Israel, however, is not expected to attend the upcoming UN meetings. The African Union welcomed Macron's announcement and urged wider international recognition of Palestine. Adding to European pressure on Israel, Dutch Prime Minister Dick Schoof called on Netanyahu to 'take a different path' and allow aid into Gaza. Schoof noted Israel's legal obligation under international law to facilitate humanitarian access and said the Dutch government is discussing with EU partners how best to increase pressure to address what he called 'a catastrophic situation.'

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store