Canada eliminates the tax on major tech firms to appease Trump and return to trade agreement negotiations.

Donald Trump’s intimidating, almost tavern-like style paid off again this Sunday evening when newly elected Canadian Prime Minister Mark Carney announced past 10 PM (Washington and Ottawa time; 4:00 AM in mainland Spain) that he was pulling back the tax intended to go into effect for major U.S. technology companies.

The prospect of that tax being applied this Monday prompted the U.S. president to unexpectedly announce on his social media platform, Truth, last Friday that the United States was ending talks to reach an economic agreement with Canada, one of its main trading partners.

Trump elaborated on the reason for his anger: “We were just informed that [Ottawa] will impose a tax on digital services and U.S. technology companies, which constitutes a direct and flagrant attack on our country,” he wrote. “Obviously,” the Republican added, “[with the plan to impose that digital tax] they are mimicking the European Union, which has done the same and is currently also in talks with us.”

The plans were to tax the profits made in that country by companies like Amazon, Apple, or Google at a rate of 3%, which was enough for Trump to announce that “all trade negotiations are terminated effective immediately.” He also indicated that “in the next seven days” he would inform Ottawa what tariffs he planned to impose on imports crossing the northern border.

“Prime Minister Carney and President Trump agreed that the parties will resume negotiations with a view to reaching a [trade] agreement before July 21,” the Canadian government stated in a communication on Sunday, bringing the crisis to an end.

Tariff Wrath

The northern neighbor was one of the first countries to suffer Trump’s tariff wrath upon his return to the White House. At the beginning of February, the U.S. president announced tariffs for Mexico and Canada citing both countries’ passivity in combating illegal immigration and fentanyl trafficking, the latter being a laughable casus belli considering the seizures of the potent opioid at the northern border.

Trump later lifted that threat but did not cease his attacks on Canadian Prime Minister Justin Trudeau, Carney’s predecessor. He also expressed his fantasy of making the country the 51st state of the Union. That rhetoric fueled a nationalist sentiment that seemed dormant until then, as well as an angry boycott against American goods.

The tariffs that Trump has imposed or plans to impose have fluctuated with an erratic trade policy. Washington has imposed levies of 25%, which on June 4 rose to 50%, on aluminum and steel, two goods produced by Canada, as well as on cars (25%). Canada, however, was exempted from the so-called “reciprocal” tariffs of 10% on all imports, which the U.S. imposed on dozens of its trading partners in a pompous act at the White House on April 2.

For both the northern neighbor and Mexico, the free trade agreement (USMCA) that links the three countries remained in force after weeks of back-and-forth, threats, and phone calls to calm tensions. It remains to be seen how much the new trade agreement, promised before July 21, will alter the rules of the game with Canada, whose main trading partner is the United States and which has imposed retaliatory tariffs on dozens of U.S. products since the onset of the trade war.

In addition to disrupting the trade balance between two countries with a couple of centuries of peaceful coexistence behind them, Trump’s return to power also changed the Liberal Party’s prospects of renewing its time in power. If their new leader, Mark Carney, won the elections, it is largely due to the pressures from the White House tenant, which sank the good prospects of the Canadian conservatives.

Carney visited the Oval Office on May 6. The trip and the cordial conversation that both held before the press served to confirm that Trump respects him more than Trudeau. Later, the two met again at the G-7 summit, which Canada hosted, held in the idyllic setting of Kananaskis in Alberta.