WASHINGTON – The day after Canada’s premiers had a meeting at the White House as part of their “charm offensive” to fight against tariffs, our country’s DST and GST were in Trump’s sights.
While signing an executive order to institute reciprocal tariffs on countries with what the Trump administration considers unfair practices, Canada’s Digital Services Tax was highlighted and our GST could face his wrath as well.
Last year, the Trudeau government implemented a 3% tax on any digital services company – think Google, Facebook, or Netflix – that earns more than $20 million in Canada.
The Americans have opposed the tax since it was first proposed and the Biden administration threatened retaliation. In August 2024, the Americans filed a complaint under the Canada-United States-Mexico Agreement claiming it violated the trade agreement.
In typical Canadian style, we ignored the Americans. In November 2024, Chrystia Freeland, who was still then the finance minister, cited the special relationship between Canada and the United States to explain that she wasn’t worried about retaliation.
“The fact that this is being handled within NAFTA is another sign of how special and privileged the Canada-U.S. trade relationship is,” Freeland said at the time.
Well, there is a new administration in town, they still don’t like the tax and they are promising to hit back.
“Though America has no such thing, and only America should be allowed to tax American firms, trading partners hand American companies a bill for something called a digital service tax,” a background note on the issue states. “Canada and France use these taxes to each collect over $500 million per year from American companies.”
On Thursday, President Trump signed what he called a plan on “Reciprocal Trade and Tariffs.” He has instructed his officials to look at what measures should be taken against such measures.
The executive order also has language that could see the Americans consider the GST an unfair trading practice. The order states that “unfair, discriminatory, or extraterritorial taxes imposed by our trading partners on United States businesses, workers, and consumers, including a value-added tax” need to be investigated.
The GST, which took effect in Canada way back in 1991, currently brings in more than $50 billion annually. It only applies to goods sold or services delivered inside Canada, which may spare it from the American line of fire – but these days it is anyone’s guess.
The U.S. government has long complained about unfair practices related to the value added tax levied by the European Union, but Canada’s GST hasn’t been seen as an issue.
Most of the Executive Order signed Thursday related to reciprocal tariffs was aimed at the EU and India.
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“The U.S. average applied Most Favored Nation (MFN) tariff on agricultural goods is 5%. But India’s average applied MFN tariff is 39%. India also charges a 100% tariff on U.S. motorcycles, while we only charge a 2.4% tariff on Indian motorcycles,” a note circulated with the Executive Order states.
“The EU also imposes a 10% tariff on imported cars. Yet the U.S. only imposes a 2.5% tariff,” the note states, while also complaining of unfair practices by the EU on shellfish.
Trump signed the order just before Indian Prime Minister Nahendra Modi was to arrive at the White House.
“The United States is one of the most open economies in the world, yet our trading partners keep their markets closed to our exports. This lack of reciprocity is unfair and contributes to our large and persistent annual trade deficit,” the briefing note said.
Since his inauguration, Trump has been pushing for a major realignment of the American economy and the global trading rules. Canada is just a small part of that push, but once again, we are going to take a hit.
This time it comes as the result of a policy decision made by the Trudeau government despite repeated warnings that there would be consequences.