Image source, AFP/Getty
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- Author, Natalie Sherman
- Author's title, Business Reporter, BBC News
The president of the United States, Donald Trump, announced Friday that he suspends “commercial negotiations with Canada.
Trump's announcement occurs while the two neighboring countries were working to reach a commercial agreement for mid -July.
Both countries imposed mutual tariffs after Trump triggered a commercial war at the beginning of this year and threatened to annexe Canada using “the economic force” of the USA.
This Friday, the US president said that he ended negotiations due to what he described as an “atrocious tax” to technological companies, and added that, in the next week, he would announce new tariffs on the products that cross the border.
“Through the present, we conclude all commercial negotiations with Canada, with immediate effect,” he wrote on social networks.
“In the next seven days, we will communicate to Canada the tariffs that you must pay to trade with the United States of America.”
In brief statements to journalists, Canadian Prime Minister Mark Carney suggested that the conversations would continue.
“We will continue to carry out these complex negotiations for the benefit of Canadians,” he said.
Image source, Mike Campbell/Nurphoto
Digital Services Tax
The 3% tax on digital services in Canada has been a conflictive point in its relationship with the United States since the law was promulgated last year. The first payments win on Monday.
Business groups estimate that it will cost US companies about US $ 2 billion a year.
The Canadian authorities had affirmed that they hoped to address the issue within the framework of commercial negotiations with the United States.
There was hope that the relatively cordial relationship that the newly chosen Carney has established with Trump could help in those negotiations.
The measure announced by President Trump doubts the future of the agreement, although the Republican has often resorted to threats on social networks to try to gain influence on conversations or accelerate negotiations that he considers stagnant.
Last month, for example, he threatened to increase tariffs on the products that reach the US from the European Union, and then back a few days later.
Candace Laing, Executive Director of the Chamber of Commerce of Canada, which has been critical of the Digital Services Tax, said that “we must wait for last minute surprises” as the deadline for reaching an agreement approaches.
“The tone of the conversations have improved in recent months, and we hope that advances continue,” he added.
Image source, Getty Images
The tariff war
The United States is the main commercial partner of Canada.
Last year he bought more than US $ 400,000 million from his northern neighbor, under a free trade agreement that had been in force for many years.
However, Trump imposed a new 25%tariff at the beginning of this year, claiming concerns about drug trafficking on the border.
The new American tariffs on cars, steel and aluminum have also complicated relationships. Car parts, for example, cross the borders between the United States, Mexico and Canada several times before a vehicle is completely assembled, and these import taxes threaten supply chains.
Trump subsequently granted exemptions for some products to the generalized alarm of the companies of both the US and Canada.
Canada responded with tariffs on some American products.
The actions in the US market fell this Friday after Trump announced that he suspended the negotiations, but then recovered and the S&P 500 closed in historical maximums.
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