Mainstream media is speculating on what both presidencies could mean for Canada, but one of their points comes with an asterisk.
It is election day in the US. It means we may be one step closer to saying, “phew, the election is over!” No matter the outcome, though, the US is going to have a new president.
So, in light of this, one of the things I’ve been seeing the mainstream media do for the last day or so is speculate on what each of the outcomes could mean for Canada. This is actually an understandable and worthwhile exercise, so I am OK with that. On the Trump side, well, prices on everything are going up in the US thanks to his promise to slap tariffs on everything. This would be be bad for Canada for obvious reasons. Canadian companies would have a harder time selling their goods and services to the US and would have to shift focus on other, more distant markets to turn better profits. If their goods are subject to a 100% tariff, then maybe it would make it financially worth it to ship overseas. So far, so good as far as I’m concerned.
When the media reports shifted their focus to Kamala Harris, however, there was one point that was made that I would dispute. That has to do with the Digital Services Tax (DST). In the reports that I saw, the mainstream media argued that Harris would move ahead with tariffs against Canada over the Digital Services Tax. That would have ramifications for Canada’s economy as well. The problem with the point that was made is that is misses the entire context for how this dispute came about.
When Canada first began moving ahead with the Digital Services Tax, it was doing so unilaterally. The argument that Canadian officials used was that an international agreement on this was moving too slowly and Canada doesn’t want to bother waiting around. For obvious reasons, this upset America who advised Canada against doing this. This is because the Digital Services Tax is a violation of the USMCA/CUSMA free trade agreement. Canada, for it’s part, ignored the US and decided to move ahead with the Digital Services Tax anyway.
Since 2022, the United States issued at least four formal warnings and US lawmakers formally sent at least two letters to the United States Trade Representative urging the organization to take action against Canada. The warnings and demands for Canada to stop were numerous publicly. Who knows how many times Canada was asked not to go through with this behind closed doors as well?
The Canadian business community was also up in arms over this. They knew how much they would get screwed over in the process. So, they also begged Canada not to do this. While some might have thought that the Canadian government would listen to the business community (even though they ignored creators and smaller news outlets over other bills), that hope quickly faded after the Canadian government gave both the US and the business community the middle finger and implemented the Digital Services Tax anyway. Experts and business leaders were left dismayed as to how the heck the Canadian government could do this and resigned to the fate that they are about to take a significant hit to their respective bottom lines.
In August, any hope that maybe the US would drop their efforts to retaliate against Canada in light of the fragile economic reality of today vanished after the US initiated trade dispute consultation over the Digital Services Tax. As a result, it seems as though a trade blow up is not a matter of if, but when.
All of this context was missing in the report that I saw. Instead, the report characterized this situation as something the Harris presidency could do, suggesting that Harris is doing this without anything Canada did. The reality is that this is a situation of Canada’s own making. What’s more, I don’t believe there is anything suggesting that a Trump presidency would not go through with this anyway, so it was a little weird to single out Harris as the one trying to do this. If anything, I wouldn’t be surprised if Trump doubles down because it goes along with his promise of slapping tariffs on anything and everything. It really could be worse under Trump.
At any rate, as I’ve said all along, the Digital Services Tax is going to blow up in Canada’s face. The Canadian government has long argued that this is in line with all of Canada’s international trade obligations, but I don’t recall them justifying this very often. Meanwhile, the US seems to have every reason to sanction Canada over this one. There’s been plenty of analysis over whether or not the US could challenge Canada over this and what recourse Canada has, but the overwhelming conclusion is that Canada is simply legally screwed here. Ultimately, if you are looking for someone to blame for the mess caused by the Digital Services Tax, well, that person is actually Justin Trudeau.
