Trump Turns on ‘Nice’ Carney With Canadian Tech Tax Ultimatum

Article content

(Bloomberg) — It had all been going so well.

Article content

Since Mark Carney replaced Justin Trudeau as prime minister, Canada’s relationship with the White House appeared to be functional again, on the mend after President Donald Trump’s tariffs and overtures about making it the “51st state.”

Article content

Article content

Trump put that rhetoric aside and called Carney a “nice gentleman.” At the Group of Seven summit in Alberta last week, host Carney envisioned a new trade and security deal with the US as soon as mid-July.

Article content

Article content

Now the prime minister faces a setback, and some are calling it an unforced error.

Article content

Article content

On Friday, Trump said he’d terminate trade talks with Canada in response to a 3% digital services tax. The levy, which would mainly hit American companies, is loathed by the White House and by Silicon Valley: the US Trade Representative and technology giants like Amazon.com Inc. say it’s a discriminatory tax.  

Article content

The tax was passed more than a year ago, before Carney even entered politics, and had already prompted warnings about retaliation. But his government decided to go ahead with implementing it, and the first payment is due Monday. 

Article content

The market was caught off-guard by Trump’s broadside, and the Canadian dollar and trade-exposed stocks dropped. “Economically, we have such power over Canada,” the president said to reporters on Friday.

Article content

Trade groups and experts lined up to say they’d long warned this would happen, including the American Chamber of Commerce in Canada and the Business Council of Canada, an influential lobby group representing top CEOs. Michael Geist, the Canada Research Chair in internet and e-commerce law at the University of Ottawa, called Friday’s blowup “completely avoidable”.

Article content

Article content

“In the same way that Trump has delayed implementation of certain tariffs, there was the opportunity to delay this for a period of time, and frame it as being in the spirit of seeking a broader trade negotiated deal with the United States,” Geist said.

Article content

The tax is “highly complex” and it had a three-year retroactive effect, which US officials said was very unfair. “It does seem to me that Canadian officials were, for a very long period, quite dismissive of the risks,” Geist said. 

Article content

Yet others believe there’s nothing obvious Carney could have done to avoid a clash with Trump eventually, perhaps over some other irritant, like Canada’s dairy trade controls, which the president also complained about at the White House on Friday.

Article content

“It is a trip wire, in the sense that this isn’t submitting to leverage,” said Jim Balsillie, the former co-CEO of Canadian smartphone pioneer BlackBerry Ltd.

Article content

“It’s not personal — he does it with everybody,” Balsillie said of Trump and his tactics. “The mistake for Canada has been that it disproportionately made itself dependent on the US over the last 30 years.”