Donald Trump’s administration is navigating significant tax and trade negotiations as the President seeks to advance a major budget bill through Congress. To date, none of the frameworks Trump’s top advisor, Kevin Hassett let slip, has produced a deal. These accords are to be completed shortly after the budget is approved. This urgency reflects the administration’s desire to see the GOP-controlled House and Senate deliver a final version of the sweeping tax-and-spending legislation to Trump before Friday.
The stakes got raised dramatically last Friday when Trump delivered an unexpected shot across Canada’s bow with threats to retaliate against its proposed Digital Services Tax (DST). He even threatened to cancel all trade negotiations with Ottawa if the DST wasn’t repealed. The ultimatum came only hours before the first collection under the new tax was set to begin. That stark reality underscores the enormous urgency of the complex negotiations still underway.
In a major step towards deeper trade negotiations, Canada has now committed to repealing its DST. Hassett expressed satisfaction with this development, stating, “I’m very pleased to see that Canada is removing its DST, which means that we didn’t have to put in this really complicated retaliation to the tax code.” Eliminating this tax will help make the way clear for continued trade talks between the two countries. We believe this change can greatly improve collaboration and momentum in their proceedings.
Come November, Trump might be more prepared for a “marathon session” in the Oval Office. During this time, he will set the precedent for U.S. tariff rates for various countries. His administration is already making every effort possible to get these rates finalized before these July 8 and July 9 deadlines. It’s questionable whether they’ll hit those dates. Through the tariff war, Trump had claimed near-unfettered executive authority. In response to a question about sticking to the established deadlines, he proclaimed, “We’re free to do anything.”
Hassett made the case that the active negotiations would eventually result in a wider rollback of digital services taxes across the globe. “My expectation is that the digital services taxes around the world will be taken off, and that that will be a key part of the … ongoing trade negotiations that we have,” he stated.
Surprisingly, or maybe not so surprisingly, Trump’s administration knows exactly how these financial policies distort the economy back here at home. Critically, they understand ramifications on global relationships and trade alliances. These negotiations have the potential to significantly re-shape the rules of the global economic playing field. Or they might set new standards for international digital taxation.