How Trump’s Bluff Forced Canada to Cancel a $5.3B Tax That Would’ve Hit Amazon, Meta, and Google

By Stocks News   |   1 week ago   |   Stock Market News
How Trump’s Bluff Forced Canada to Cancel a $5.3B Tax That Would’ve Hit Amazon, Meta, and Google

Just as the market was settling into cruise control heading into July, Canada tossed a wrench into the engine. The S&P 500 and Nasdaq were at fresh all-time highs, traders were feeling themselves, and the emotion was full-on “nothing can stop us now.” And then… Canada happened.

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With zero sense of timing, Ottawa decided to roll out a 3% digital services tax aimed squarely at U.S. tech giants (Amazon, Meta, Google, Netflix) you know, the companies responsible for 97% of your screen time (and probably 80% of your dopamine hits). The tax would’ve applied to revenue (not profit), and just for fun, it would’ve been retroactive to 2022. (Imagine your ex showing up two years later and saying, “Actually, you owe me for all those Spotify logins.” That’s the situation.)

To be clear, this Digital Services Tax wasn’t new. It’s been floating around Canadian politics since 2020, passed in 2023, and scheduled to go live June 30. But U.S. officials (especially Trump) weren’t exactly thrilled with the idea of a foreign government back-charging American companies for using the internet.

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On Friday, Trump threw gas on the fire, calling the DST a “direct and blatant attack” on the U.S. and immediately cutting off trade negotiations with Canada. He also told Fox News that “Canada is very nasty to deal with,” which is probably the meanest thing anyone has ever said about Canada (they probably negotiate like Mr. Rogers.)

Then, in a late-night Sunday reversal, Canada pulled the plug (and what do you know, it had to do with cold hard cash). Here’s the thing, Canada trades $1.3 trillion worth of goods and services with the U.S. every year. We’re far more than neighbors. We’re their entire economy. So poking the bear over a few billion in tax revenue isn’t a great idea when you’re also trying to land a broader trade deal by July 21. Even Canada’s own business leaders hated the tax. Goldy Hyder, president of the Business Council of Canada, warned that this kind of unilateral move would risk cutting cross-border economic ties. And, well… he was right.

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Finance Minister Francois-Philippe Champagne (real name) said scrapping the tax would “help create jobs and prosperity for all Canadians.” Translation: We need this deal, and we like having an economy, thank you very much. This was one of several key issues investors across the globe were watching. Markets have been stuck in a pressure cooker. Between Trump’s July 9 tariff deadline, ongoing trade talks with China, and the EU circling Big Tech with fresh tax threats, all it would’ve taken was one wrong headline for things to boil over.

Removing the Canadian tax calms things down (at least temporarily) and gives Big Tech one less thing to worry about. Now Meta, Alphabet, Amazon, and Netflix all get to start the week with some good news. And if you’re betting on more upside? The removal of an international revenue wet blanket is the kind of boring-but-important stuff that actually moves price targets.

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It also signals that countries are starting to realize that antagonizing the U.S. over tech taxes right now isn’t worth the blowback. So yeah, now Trump and Canadian PM Mark Carney are back at the table, and both sides now have until July 21 to finalize a broader trade agreement. Meanwhile, the July 9 tariff deadline is still hanging around… but this move by Canada shows that countries willing to “negotiate in good faith” might just get spared.

Of course, this story isn't wrapped up with a neat little bow (yet). Europe’s still out here testing its luck, moving forward with its own digital tax proposals like Trump won’t notice (he definitely will). Countries like France have already rolled out their versions, and the EU has floated ideas for taxing Big Tech’s ad revenue more extensively… basically daring the U.S. to flinch.

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At the same time, Trump’s trade team is juggling a dozen simultaneous negotiations (China, the EU, Japan, Mexico) all before his self-imposed July 9 tariff deadline. The message is pretty clear: get in line, play nice, or pay the price. So while this isn’t a done deal… it’s a clear signal that pressure works (and that not everyone has the stomach for a trade war over cloud storage and ad impressions).

Say what you want about Trump being a loose cannon, but a few months ago people were calling him unhinged. Now? If the next couple weeks go his way, it might look more like he strong-armed half the globe into playing by his rules. Guess we’ll find out soon enough.

At the time of publishing this article, Stocks.News holds positions in Amazon, Meta, Google, Spotify, and Netflix as mentioned in the article. 

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