00:00U.S. President Donald Trump on Friday decided to abruptly kill all trade talks with Canada
00:21after it decided to go ahead with a new digital services tax on foreign as well as domestic
00:27technology companies. In retaliation to this, Trump decided to end all trade talks with Canada
00:34and threatened imposing additional tariffs on exports from the U.S.'s northern neighbourhood.
00:41In a post on Truth Social, Trump termed Canada a very difficult country to trade with
00:48and called the new Canadian digital tax a direct and blatant attack on the U.S.
00:54So, what exactly is this digital services tax imposed by Canada?
01:00Canada's Digital Services Tax Act was first proposed in 2019 and approved and enforced in June last year.
01:09This digital services tax is a levy on tech-driven news generated from Canadian users even if the
01:17providers do not have a physical presence in the country. As per this tax, large technology firms
01:24with global revenues exceeding $820 million and Canadian revenues of more than $14.7 million
01:33must pay a 3% levy on certain digital services revenues which they earned in Canada.
01:41Now, one of the most contentious parts of the new framework for businesses
01:45is the retroactive nature of the tax. That is, that this new levy will be applicable on revenues made
01:53by a company starting back right from January 1, 2022. That is, over three years of revenue.
02:02Now, to put things into perspective, U.S. companies such as Amazon, Meta, Google and Uber face an estimated
02:10$2 billion in bills under the new tax imposed by Canada.
02:16And that is why Trump has taken so harshly to the new Canadian tax.
02:22On June 11, 21 U.S. Congress members urged Trump to pressure Canada into rolling back this tax,
02:30arguing that it would set a terrible precedent having long and lasting impacts on global tax and trade
02:37practices. And Trump acted. After posting about his decision to end all trade talks with Canada,
02:44Trump also threatened with imposing additional tariffs on Canadian goods and services,
02:50and warned that Canada was foolish to do it and it will not work out well for them.
02:57Now, the U.S. is Canada's largest trading partner by far,
03:01with more than 80 percent of Canadian exports destined for the U.S. A disruption due to tariffs
03:07on products like automobiles, minerals, energy or aluminium could have massive ripple effects
03:14across both the economies, but especially on the Canadian economy.
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