As President Donald Trump signed an executive order Thursday authorizing reciprocal tariffs, his White House took aim at Canada鈥檚 digital services tax as a major trade irritant.
The White House sent out a document calling digital taxes in both Canada and France 鈥渦nfair鈥� for taxing American companies.
Speaking in the Oval Office Thursday afternoon, Trump also slammed Canada on trade and singled out its low defence spending, saying Canada is a 鈥渧ery serious contender to be our 51st state.鈥�
鈥淐anada鈥檚 been very bad for us on trade but now Canada鈥檚 going to have to start paying up,鈥� he said. 鈥淐anada鈥檚 going to be a very interesting situation because we just don鈥檛 need their product.鈥�
The Trudeau government鈥檚 three per cent tax came into effect over the summer, which requires large tech businesses to pay tax on revenues earned through engaging online users in Canada.
The controversial policy has stirred the ire of U.S.-based lobby groups. The Business Council of Canada and Canadian Chamber of Commerce have long warned it would invite retaliation from the U.S.
鈥淐anada and France use these taxes to each collect over $500 million per year from American companies,鈥� said a White House fact sheet.
The Trudeau government鈥檚 last budget estimated the tax, which is retroactive for the first few years, should bolster Ottawa鈥檚 coffers by some $5.9 billion over five years.
Trump鈥檚 latest executive order says the U.S. will counter against a sweeping range of trade irritants, including subsidies and 鈥渂urdensome regulatory requirements.鈥�
It also singles out a suite of non-tariff trade barriers, ranging from human and animal health trade requirements to government procurement policies, intellectual property protection and digital trade barriers.
鈥淭his could be a massive overhaul of how tariffs are set,鈥� said William Pellerin, an international trade lawyer at McMillan.
He explains that countries set their tariff rates under trade agreements, and generally must set the same tariff levels for all countries 鈥� abiding by something called the 鈥淢ost Favoured Nation鈥� principle. That is, unless countries enter into further trade agreements to further lower rates.
But this move would upend those norms, allowing them to be adjusted on a case-by-case basis.
The move raises all kinds of questions about how it would work 鈥� not to mention how quickly all this could be implemented.
Putting Trump鈥檚 order into force will launch the U.S. government into a complex process that Pellerin said will likely take months to sort out 鈥� at the soonest.
