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THE DIGITAL SERVICES TAX (DST):
In 2020, Canada proposed a 3% Digital Services Tax targeting giant tech companies like Google and Netflix, arguing they earned huge profits from Canadian users but paid little tax locally, partly because many are incorporated in low-tax Ireland (12.5% Corporate Tax Rate). Canada passed the tax in 2024 (retroactive to 2022) potentially costing U.S. tech firms billions, with payments due by June 30th 2025.
CURRENT TARIFFS WITH CANADA:
There's currently a 25% tariff on most Canadian goods - as well as auto parts and vehicles, a 50% tariff on steel and aluminum, and a 10% tariff on energy (this is currently paused, indefinitely). However, tariffs with Canada are not new. In 2017, the US tariffs on Canadian Lumber. In 2018, we saw the same 25% tariffs on steel and aluminum, and in 2019 - those tariffs were removed after back and forth negotiations.
The same also applies to a “Digital Services Tax” - most people don’t realize that France enacted a 3% tax in 2019, the United Kingdom launched a 2% tax, and over a dozen other locations also followed suit.
TRUMP NEGOTIATIONS:
Trump said it himself: “We can do whatever we want.” There are no hard deadlines, anyone is free to do or negotiate however they want, and if matters need to escalate for the sake of getting a deal - it doesn’t seem like there’s any hesitation, whatsoever, to make a very public scene. This is why, when recently asked about the July 9th Tariff Deadline for global tariffs, Trump said: “We could extend it. We could make it shorter."
THE TACO STRATEGY:
Some investors have made a ton of money following the acronym: Trump Always Chickens Out; It's investing on the pattern that Trump makes intense threats against trading partners and then pulls back on his position once confronted with an adverse reaction from within the market.
Now, on the one hand, it’s said that “It’s easy to underestimate the amount of harm that his negotiating style has done, not just to other countries but also to the United States” - but, on the other hand…this is textbook strategy from his “Art Of The Deal Book,” which starts with an extreme ask, using leverage and urgency, while pressure is applied, publicly - without losing control of the narrative (all of which is currently playing out, in real time).
TOO LONG - DIDN'T READ:
From Canada’s perspective, they want “tax fairness,” where big tech isn’t able to freely profit from Canadian users. But, from the United States side - it looks like a direct tax on American businesses, especially when this tax doesn’t apply to most Canadian companies.
Long term, I do tend to believe that there will be some type of “digital services tax” enacted - globally - that would compensate other countries, but - it’s already dragged on for years without much progress, so I don’t have any faith that it’ll happen anytime soon.
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