What was Mark Carney thinking when he walked back the digital services tax?

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Taylor C. Noakes is an independent journalist and public historian.

So much for elbows up.

Prime Minister Mark Carney briskly walked back Canada’s digital services tax (DST) late Sunday, after U.S. President Donald Trump’s threats to stop trade talks. There was not much of even a hint of a fight from our Prime Minister.

When Mr. Carney was elected in late April, we thought we were getting a real fighter, someone who campaigned on the idea that the “the old relationship between Canada and the United States, based on steadily increasing integration, is over.”

Canadians could be forgiven for interpreting this literally, as the deranged American President had launched an unprovoked, unnecessary and wholly unwarranted trade war against us. Mr. Trump provided ludicrous justifications – all of which have been thoroughly disproven – from arguing the U.S. subsidizes Canada to saying Canada is the primary source of fentanyl and irregular migration.

Those people familiar with Mr. Trump’s biography recognized in these statements his favourite negotiation tactic: Start from an untenable and ludicrous position to make subsequent demands seem more reasonable. When Mr. Trump decided to break off trade negotiations last week over the DST, he took precisely that approach.

Here’s the thing: Mr. Carney was wrong to cave to Mr. Trump, for there is nothing wrong with the DST. American tech giants that provide digital services in Canada – such as Amazon.com Inc., Uber Technologies Inc., Airbnb Inc., Google and X Corp. (formerly Twitter) – have arguably never been taxed properly, and the DST was intended to both update the tax code as much as generate tax revenue from exceptionally profitable businesses that were given a tax break for far too long.

Explainer: Canada cancelled its digital services tax. What was it and why did the U.S. hate it?

And, for the record, though Mr. Trump has falsely claimed trade deficits and military spending are examples of the U.S. subsidizing Canada, by not taxing U.S. tech giants, it is in fact Canadians who are subsidizing the U.S.

Let’s be clear: We’re subsidizing American tech giants that have been undermining Canada’s economy as much as our sovereignty for many years. Amazon has decimated Main Street. Airbnb eliminated cheap rental housing. Google destroyed the ad revenue that funded journalism. Facebook and Twitter are our number one sources of hate speech and misinformation. Even with retroactive taxation and an estimated $7-billion in new revenue over five years, the DST was supposed to provide far too little in benefit compared to the economic and social destruction wrought by American tech giants.

These important considerations notwithstanding, consider as well that Mr. Carney’s capitulation to Mr. Trump effectively granted the American President a de facto veto power over Parliament. If we thought advocating for our sovereignty was hard as the junior partner of an integrated continental economy and defence pact, it will certainly be harder now that the man who consistently threatens us with annexation knows that throwing a fit and storming out of the room is all that’s needed to get our Prime Minister to unilaterally cancel legislation already passed by Parliament.

These are not the actions of a sovereign nation negotiating from a position of power. Mr. Carney should know that there is no negotiating with terrorists or toddlers, and the American President is both.

Opinion: The digital services tax was bad policy, but killing it now makes us look terribly weak

Mr. Carney’s walk-back of the DST compounds his other missteps. Despite all the rhetoric over the past three months about restructuring Canada’s economy, finding new trade partners and making our nation more self-sustaining and self-sufficient, Mr. Carney has so far failed to deliver. Worse, he has made a series of troubling policy decisions, each with profoundly negative economic consequences, all of which demonstrate appeasement and acquiescence to Mr. Trump.

From failing to retaliate on steel and aluminum tariffs to stratospheric defence spending promises (likely to result in austerity and major cutbacks to the civil service), from a border bill that responds to fake fentanyl crisis to folding on a modest taxation policy, Mr. Carney appears to be everything his more lettered critics warned us of.

Mr. Carney’s sorry Sunday episode puts in stark contrast his resolve and firmness during the election. We voted for a champion, not capitulation.