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00:00President Trump is on Canada's case again.
00:04Yesterday he threw something of a tantrum and announced that he was terminating all discussions on trade
00:09with Canada effective immediately.
00:12What does this latest twist mean?
00:14Where is it likely to lead?
00:16What does it say about what's coming for the rest of the world?
00:20And does Canada have to give Trump what he wants in order to get more stability?
00:26Well, let's discuss.
00:27First of all, all of this arose, according to Trump anyway,
00:31because of Canada's imminent implementation of the digital services tax.
00:37Trump called this tax a direct and blatant attack on our country,
00:42which is definitely not on because that's his job.
00:47A line which works pretty much whatever country you're talking about.
00:51But I digress.
00:52What is the digital services tax?
00:54Well, a quick recap on some recent tussling between Canada and Facebook, Meta.
01:00Two years ago, Canada introduced the Online News Act,
01:04which was supposed to address the way that the big online platforms were serving up news content
01:09drawn from traditional news providers,
01:12but often doing so in ways that deprived those providers of advertising revenue
01:17to the benefit of their own revenue.
01:19Companies like Meta refuted that.
01:22But Canada, and it wasn't the first one to do this,
01:25decided to force the online giants to pay Canadian publishers for their news content.
01:31Meta said, fine.
01:33Well, in that case, we'll block all Canadian news outlets in Facebook and Instagram posts,
01:39and then those users will lose the service they value.
01:42But in any case, we won't pay you a penny.
01:44Canada responded to this last year, deciding to bring in a digital services tax,
01:50which would see digital services operating in the region that bring in more than $20 million per year,
01:55they would be charged with a 3% tax on their local earnings above that threshold.
02:01That means that Meta will still have to pay,
02:05even though it's not using local news publisher content anymore.
02:08The first payments are due next week,
02:11which seems likely to have been the prompt for the royal hissy fit.
02:16Probably made somewhat more urgent
02:18by the fact that the introduction of the tax is retroactive back to 2023,
02:24which means the companies could be hit with an opening tax bill of something like $2 billion.
02:29But of course, Mark Zuckerberg and the other big tech bros,
02:33well, they've been donating money to Trump,
02:35turning up to his inauguration and generally taking advantage of the way
02:40that money talks in this particular administration.
02:43So they have been highly effective at getting Trump lined up alongside them
02:47to see American technology as, as Zuckerberg says,
02:51a bright spot in the American economy.
02:54The implication being that it is of strategic advantage for the US
02:59to defend the interests of its tech companies.
03:02After all, just about all the internet giants are American.
03:06They have something of a stranglehold on social media and AI development
03:10and many other aspects of technology across the world.
03:13That makes it both the most natural thing for countries around the world to think,
03:18well, they're making vast slabs of money from our citizens.
03:23We should be able to get some of that in taxes,
03:26as we would have done if they were spending on physical products.
03:29And likewise, the most natural thing of the United States
03:32for the president to say,
03:34well, hands off, all of that money is earmarked
03:37to enrich the glory and world dominance of the United States.
03:41The European Union has its own version of this coming
03:44and that is probably the real focus for Trump's ire.
03:48It's just that this one was about to be implemented first.
03:51So in the Oval Office yesterday,
03:53Trump told journalists that Canada had been very difficult to deal with,
03:57which I would take as a compliment if I was Canadian,
04:00although I doubt he meant it that way.
04:02And then he spoke like the bully that he is,
04:06like the bully that came up with all those punitive tariffs
04:09as a way to push unwelcome settlements on countries across the world.
04:15He said,
04:15It's not going to work out well for Canada.
04:18They were foolish to do it.
04:20So I said,
04:22We're going to stop all negotiations with Canada right now
04:25until they straighten out their act.
04:29He went on to call the European Union very nasty,
04:32but they'll learn not to be so nasty very soon.
04:36They know that.
04:37They know it's coming.
04:39His Treasury Secretary, Scott Besant, added detail to this.
04:43Speaking to CNBC, he said,
04:46We knew the tax was coming.
04:47We hoped they wouldn't do it.
04:49We think it's patently unfair to do it retroactive.
04:53This is something from the Trudeau years.
04:55So we were hoping, as a sign of goodwill,
04:58that the new Carly administration
05:00would at least put a break on that during the trade talks.
05:04They seem not to have.
05:06Kind of weird to see the US administration
05:08pleading for signs of goodwill,
05:11when such signs are in remarkably short supply,
05:14feeding in the other direction.
05:16I mean, you can decide that you're going to
05:19operate in the world as the biggest bully in the playground,
05:22because you can,
05:23and because you've decided that might makes right.
05:26But while that might mean that you'd be able to
05:29counter the moves made back at you,
05:31coming over as all hurt and aggrieved
05:33that such things were ever done,
05:35it's kind of pathetic.
05:37I mean, play by the rules that you're setting.
05:40It's like boasting that you're ready in tooth and claw,
05:43but then in reality you faint at the first sight of blood.
05:46Anyway, this now means that Trump has said
05:49that he will announce in the next week or so
05:51a new raft of tariffs that will apply to Canada.
05:56Scott Besant suggested that Trump was prepared
05:59to impose higher tariffs against all Canadian goods
06:02in response to the digital services tax.
06:04He said it would likely lead to a Section 301 probe
06:08that would lead to tariff retaliation
06:11in the same amount of cost to US firms,
06:15i.e. around $2 billion.
06:18Now, I don't think that makes sense,
06:20since it wouldn't help the tech companies for that to happen,
06:23which seems to be the point of the objection.
06:25Far more likely, it seems to me,
06:28what Trump will aim to do
06:29is another extravagant headline-grabbing punitive tariff rate
06:33– there's no such thing as enough headlines, after all –
06:37with the ultimate aim of forcing Ottawa into a U-turn
06:41on the digital tax specifically.
06:44Once they do that, Trump claims victory,
06:47Mark Zuckerberg signs up for more donations to his future campaigns,
06:51and all things Canadian become negotiable again.
06:54But this isn't solely about meta and digital services.
07:00It's really about Trump's ambition that the tariff deal he strikes
07:03must be massively and unfairly to America's benefit.
07:07The whole point of initiating the process
07:10with shock tariff levels announced with great pomp and circumstance
07:13is that you have to go to great lengths to offer him
07:17what he decides will be labelled as a fair deal.
07:21It's not that the idea of a digital services tax is inherently unfair,
07:26it's just that it doesn't match the one-sided mould
07:30that he's seeking to cast around all of these details.
07:34It's supposed to be about what you give to America,
07:39not what you take in return.
07:42What you get in return is he stops delivering pain on you.
07:46He stops imposing huge tariffs
07:48that he didn't need to impose in the first place.
07:50A classic mobster protection racket.
07:54And the logic is reflected in his language.
07:56So he said this in the Oval Office yesterday as well.
07:59We have all the cards, he said.
08:02We have every single one.
08:04We don't want to do anything bad,
08:06but economically we have such power over Canada.
08:10I'd rather not use it.
08:12Such a nice country.
08:14Shame if anything were to happen to it.
08:16Most of their business is with us, he added.
08:19And when you have that circumstance, you treat people better.
08:23In other words, do everything we ask.
08:26That's the definition of treating them better.
08:29Now, on July the 9th, a lot of countries are supposed to have struck deals with the US
08:34in order to avoid unfortunate accidents happening to their own economies.
08:39It seems unlikely that deadline will be met for most of them.
08:44Largely because many countries have resisted the extortionate demands that America has put to them.
08:50But then, this is a likely part of Trump's calculation as well.
08:54Slapping a huge tariff on Canada right now,
08:58and in so doing, forcing it to back down on a key issue of contention,
09:02that would send a very helpful message to all the others.
09:07The EU particularly, as well as some of the Southeast Asian countries.
09:11So, will Canada end up caving on this?
09:15I mean, it's been working on the digital services tax since 2021.
09:20A process that included lots of public consultation before it became law.
09:24So, it's not as though it was introduced on a whim,
09:27like the Trump tariffs, for example.
09:30Finance Minister Francois-Philippe Champagne said that the tax was going ahead regardless.
09:34However, since the initial shock of Trump's attacks and the brief honeymoon from the election,
09:42those have both worn off.
09:44Prime Minister Mark Carney faces pushback from within the country.
09:48The Business Council for Canada, for instance,
09:51said it had long warned that this would be the consequence
09:54of going ahead with the digital services tax and called for a reversal.
09:59Meanwhile, Canada continues to work on its main project,
10:02of working towards a period where it is less exposed to the United States.
10:08A fairly big project.
10:10So, this has included this week Canada's Parliament passing a bill
10:13to give the government new powers to fast-track major national projects.
10:19Carney had suggested that it could be used to construct energy corridors,
10:23to expand mines, to build ports and so on.
10:27Also, Canada last week signed up to a security and defence pact with Europe.
10:32The most far-reaching such agreements that the EU has undertaken with a third party.
10:39This will include weapons manufacturing deals,
10:41as well as joint work on crisis management, cyber and cyber threats and the like.
10:47But with all of that, it is going to take significant time and resource
10:52for Canada to truly get to a position where it is no longer exposed
10:56to the malignant intent from its primary trading partner.
11:00From the highly visible fact of the world's way of dealing with Trump,
11:05it seems likely the case the President just wants Canada to grovel more.
11:11Because this is rapidly what he's getting used to.
11:14After the sycophantic love messages for Mark Rutter,
11:17the head of NATO that Trump shared on social media,
11:21and all the kowtowing from the rest of the NATO members
11:24and the country leaders that now visit him in the White House,
11:27Mark Carney had been credited as having dealt with Trump politely and effectively,
11:32but nevertheless having stood up to him pretty robustly.
11:37And this was held up as a contrast to the feeble endeavours of some of the other leaders.
11:43Well, maybe that was never going to be allowed to stand for long.
11:47In her book that talks about her experience working as a Russia expert
11:51for the first Trump administration,
11:54Fiona Hill notes that you saw then what we've seen again this time.
11:58Trump's cabinet members going out of their way to praise him in the most surreal terms
12:04whenever the journalists and the cameras are present.
12:07She said that those that did not do that,
12:11like former Secretary of Defence Jim Mattis,
12:14that didn't escape notice and it likely shortened their tenure in office.
12:20So, that's the standard.
12:22And I think it's probably one that applies now to foreign leaders
12:25as much as it does to his own team.
12:28You want lower tariffs?
12:30Well, you have to sign up to a one-sided deal.
12:33But you also have to kiss that ring,
12:35do a stint of grovelling in front of the cameras.
12:39It is pathetic and grotesque theatre.
12:43But there it is.
12:44This is now how the world works.
12:46If Mark Carney and Canada can stand up in this moment
12:50and show that there remains another way of dealing with the bully,
12:54I, for one, would be cheering them on.
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