The best thing Canada and Prime Minister Mark Carney’s government can do is just keep calm and carry on.BRENDAN SMIALOWSKI/AFP/Getty Images
As Forrest Gump’s momma might have said, had she been a Canadian trade negotiator, dealing with Donald Trump is like a box of chocolates: You never know what you’re gonna get.
Or what you’ll be asked to give up. Or what, if anything, the U.S. President will offer in return. Or what will set him off, or calm him down. Or whether he’s put rocks in the Turtles. Or if you make a deal, whether he’ll rip it up before the ink is dry.
Late Sunday evening, Ottawa abandoned its digital services tax, just hours before it was to go into effect, after Mr. Trump said he was ending all trade talks until Canada scrapped it. The levy has been in the works for years, but the White House has long opposed it, going back to when Joe Biden was president.
The tax is, or was, a 3-per-cent levy on income earned in Canada by major players on the web. The theory behind it is that foreign (mostly American) companies making money in Canada through the sale of digital services do so without facing taxation on earnings in this country.
Washington was always going to push for the elimination of the tax as part of a broader trade deal. And Canada, it is fair to bet, was going to be willing to give in to that demand, if it unlocked a deal.
The digital services tax was bad policy, but killing it now makes us look terribly weak
A guide to The Globe’s Canada Day coverage
Was Canada threatening to start collecting money on June 30 partly as a bargaining tactic? Had the tax become the kind of irritant you put in the window precisely because the other side wants it removed it, thereby kicking off some horse trading?
The tax was expected to bring in about $900-million a year. That’s small change. It’s like a car salesman throwing in a free bottle of Turtle Wax.
Mr. Trump publicly halting negotiations until Canada dropped something it was going to drop in those negotiations may be a way for the President to look like the big man who made an opponent bend to his will. It may open the door to a trade deal, which the Trump administration will be able to sell not only as one of the promised “90 deals in 90 days,” but a victory.
The Canadian concession is small. But if there’s a trade agreement in the coming weeks, it could allow the MAGA mediasphere to proclaim that Mr. Trump has once again demonstrated his unparalleled negotiating genius and power, and used it for the benefit of an American industry.
That’s the best version of how this story ends. Canada gets what it wants, which is a trade deal that largely maintains the one agreed under the last Trump administration: the United States-Mexico-Canada Agreement (USMCA). And Mr. Trump gets what he wants, which is the appearance of dominance and the impression that he won something.
But negotiating with Mr. Trump is like a bottomless box of chocolates: There’s always something else. And something else after that.
Canada made a concession that it was almost certainly prepared to concede, but what did it get in return? Are there more demands that Mr. Trump will pull out of his hat, as he’s been doing since before his inauguration?
We’ve faced tariffs based on an imaginary flood of cross-border fentanyl; demands for more military spending; tariffs on autos, steel and aluminum; and now this insistence that Canada rewrite domestic tax law. Any more bonbons down there?
The President was on Fox News on Sunday, once again railing against supply management, and claiming that Canada is “very nasty to deal with” and that “they cheat” on the USMCA. And of course we should be the 51st state because “Canada relies entirely on the United States.”
Until a few years ago, retailer L.L. Bean had a lifetime return policy: You could return anything, forever. Like the customers who abused that policy until it had to be ended, Mr. Trump has taken this approach to the USMCA: I signed on the dotted line, but I can un-sign at any time.
With threats and tariffs that violate the terms of the agreement, he has started ripping it up. And he has given every sign that he wants some tariffs to remain, even in a post-USMCA deal.
The best Canada can do is what Prime Minister Mark Carney’s government is trying to do: Keep calm and carry on. Focus on the things we control, like our own economy, our own ability to get things built, our own capacity to strengthen relationships with more reliable partners.
Meanwhile, it’s Canada Day – the day when the United Province of Canada, Nova Scotia and New Brunswick joined together in Confederation. Canada was not created in 1867. It was expanded and improved. Improvement and expansion continued in the years and decades after.
We’ve had an evolving and continually progressing political system, unbroken by successful domestic revolution or foreign invasion, since 1763. Ours is one of the world’s oldest and most stable polities.
During the COVID-19 pandemic, people and businesses in Quebec put up signs that read: Ça va bien aller. It’ll all work out. Even with that guy in the White House, ça va bien aller. We always find a way. Happy Canada Day.