By Victor Davis Hanson
I’d like to talk about our two North American partners, Canada and Mexico.
We’ve been in disagreements on trade and other issues about the border with both of them recently. But here’s what’s happened. Given all this contention, you would think that Mexican President Claudia Sheinbaum and Prime Minister Mark Carney in Canada would want to cool passion. But that’s not what happened.
Recently, Canada decided that they were going to enforce the digital services tax. That was something that was passed but not enforced yet. And what it was is a 3% tax on our tech companies—Amazon, Apple, Meta, Google—by anybody in Canada who uses their service.
You buy something online, you buy an ad, you pay a fee to any of these and you’re Canadian, then you’re going to pay 3%—you’re going to have to have a 3% tax for the use of Canadian consumers. And they don’t even have to be in Canada. They can be in the United States. So, they’re going to charge them 3%.
And this is the killer. They’re going to enforce the law all the way back to 2022. So, all of a sudden next month, our tech companies—not that I worry about their financial situation. There’s $9 trillion of market capitalization in Silicon Valley. But the idea that they’re going to be gouged for $2 or $3 billion right in the middle of these heated discussions.
And what are those heated discussions? Canada has $63 billion in trade surpluses with us. That’s one backdrop. They have an unenforced border. As we close the southern border, some of the influxes of drugs and illegal aliens started to come northward. And of course, they pay 1.37% of gross domestic product in NATO contributions.
So, given that all those are contentious issues, why would the Canadians now create a new tax? I know they passed it a while back, but why would they start enforcing it right now and try to rub our noses in it? It makes no sense.
The same thing is true of Mexico. There’s about $1.5 trillion of total trade between Mexico, the United States, and Canada. And if you look at it, most of that growth and wealth is in the United States.
Mexico runs about three times the surplus that Canada does with us, about $171 billion per year. They have about $20 billion going to their cartels that diffuses through the economy. And they get $63 billion in remittances. Remittances on top of the $171 billion in trade surpluses. And this is in addition to about $60 to $70 billion going into Central America, some of which comes through Mexico as these people either go into the United States or go back to Central America. So, they do profit from that as well.
So, what am I getting? Why would Sheinbaum start saying to us that taxing 2% or 3%—that’s what the Senate version is, maybe 4% or 5% in the House—that’s unacceptable to Mexico? Or why would she weigh in on the LA riots and say that she’s going to protect Mexican nationals?
If you’re going to protect Mexican nationals, the best thing you could do is say, “Come home. We want you. Our fertility rate is going down. You have no business in the United States. That’s a foreign country because you entered illegally and you’re residing illegally.”
So bottom line, why is Carney trying to rub salt in these very painful wounds that we’ve been going through the last few months by initiating a retroactive kind of a bill of attainder tax? And if that goes through, believe me, the Europeans will follow suit.
And why is Sheinbaum weighing in on the “Big, Beautiful Bill” and telling us not to tax remittances, which is one reason why she’s opened her Guatemalan border and welcomed people in here and Mexican citizens in here to get that $63 billion? And why would she weigh in in this very contentious period in Los Angeles? Disruptive. We have the Olympics coming. We have Mexican nationals spitting, burning on the American flag, waving the Mexico—don’t weigh in.
What would be the solution? We don’t have a solution, but they are playing with fire. I have a solution. Maybe we could take Mexico and put it next to Canada and let them fight it out with each other and keep us out of it.
First published in the Daily Signal
One Response
Regarding the section of the article about Cabada. The information is not correct.
The DST is levied on the Profits that the service provider earns in Canada.
As well, yes there is a goods surplus in Canada’s favour vis the US but if yu add in all the services from Us eg Amazon etc the US has a $60B surplus to Canada.
Check your facts VDH.