Joe Oliver: Do what’s right for Canada, even if Trump demands it

Critics of Canada's now-cancelled digital services tax argued that it would have increase costs for Canadian consumers. Photo by ALAIN JOCARD /AFP/Getty Images

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Prime Minister Mark Carney feebly capitulated to President Donald Trump on Sunday night by rescinding Monday’s scheduled imposition of a retroactive digital services tax (DST) just two days after Trump suspended trade talks with Canada over the DST and promised to hit us with more tariffs in response. This humiliating public surrender would not have happened if the government had taken Washington’s repeatedly expressed concerns about the tax more seriously. What’s even worse, we brought on Trump’s latest assault with a policy that actually works against our national interest, even absent the trade menace. The fact that Trump hates it does not make it any better.

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The DST would seize three per cent of the revenue generated in Canada by large online service providers, including Alphabet (Google), Meta (Facebook and Instagram), Amazon, Apple, Netflix and X. Of course, the digital behemoths would ultimately pass along the tax, which could total $7.2 billion over five years, to their customers, thereby resulting in higher prices, increased costs for digital advertising and reduced competitiveness of online businesses. In the end, it is an indirect tax on Canadian individuals and businesses.

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As many critics argued, tariff retaliation against the DST was perfectly predictable.

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Canada should instead have been strategic and used the DST as part of a broader trade discussion, rather than play the card early and have it shredded. Somehow, in spite of repeated warnings from American trade officials, the government underestimated the likelihood of an aggressive U.S. response.

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There may be more to come. A few days ago, in an interview with Fox News, Trump included supply management (SM) in the list of Canada’s “egregious” trade practices, and not for the first time. SM is a Soviet-style, government-approved cartel that minutely controls production, prices and imports of milk, cheese, eggs, and poultry through rigorous quotas and very high tariffs. The result is higher-cost food staples, disproportionately harmful to the poor and to families with children. In addition, SM reduces consumer choice, stifles innovation and prevents farmers from developing export markets. Most crucially, in the current moment it seriously jeopardizes our trade negotiations with a president who “loves” tariffs and is hyper-sensitive to America being unfairly treated, regardless of the bigger picture.

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The beneficiaries of SM are about 10,000 dairy farmers, mainly in Quebec and Ontario, who own the quotas and form an extremely powerful lobbying group that no political party has been prepared to oppose. So much so that, as the very first piece of legislation out of the new Parliament, the Bloc Québécois was able to pass, on unanimous consent, Bill C-202, which freezes tariff quantities and rates.

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The government has to decide whether the commercial interests of a small number of privileged farmers — who would be compensated if supply management were phased out — should override the broader public interest of 42 million Canadians, including 9.1 million Quebecers. The Australians have shown it can be done: In 2000, they disbanded SM, compensating farmers with a temporary tax on milk. As a result, milk prices declined and the industry prospered.

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In light of the tariff crisis, Mark Carney has the opportunity to make the case for change, provided he can muster the political courage. He has already promised a couple of other major policy reversals, although he still has to deliver on both.