Canada drops tech tax to progress trade talks

Summary

Marketplace Morning Report: Canada Drops Tech Tax to Progress Trade Talks Release Date: June 30, 2025

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1. Canada Abandons Digital Services Tax Amid Trade Tensions

Liana Byrne opens the episode with significant news from North America: Canada has officially withdrawn its proposed Digital Services Tax (DST) just hours before its scheduled implementation. This move comes in response to heightened tensions with the United States, where former President Donald Trump threatened to derail ongoing trade negotiations over the tax.

Key Details:

• Digital Services Tax (DST): Intended to target major U.S. tech giants like Amazon, Meta, and Apple, the DST aimed to ensure these companies pay appropriate taxes on their revenues generated within Canada.

• Government Statement: The Canadian Department of Finance announced the rescission of the DST, citing the anticipation of a "comprehensive trade arrangement" with the U.S. This decision underscores Canada's willingness to compromise to maintain stable trade relations.

Notable Quote:

• Carlene Varian, Associate Vice President at Summa Strategies and former Chief of Staff to Canadian Prime Minister Justin Trudeau, comments on the political maneuvering:

  “This is not just a Donald Trump and Republican grievance under President Biden. His U.S. Trade Representative frequently raised the issue of the DST with Canadian counterparts as a point of disagreement…. I think the president likes to create some drama at the 11th hour and this is the moment when the tax would have been implemented.”
  (02:09)

Implications for Canadian Businesses: Varian highlights a split within the Canadian business community. While some businesses fear repercussions from U.S. actions unrelated to them, others are directly affected as tech companies may pass the DST costs onto consumers. This division reflects the complex dynamics of international trade and the delicate balance governments must maintain between taxation and maintaining trade relationships.

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2. UK-US Trade Deal Reduces Tariffs for Auto and Aviation Sectors

Shifting focus to transatlantic trade, Liana Byrne reports on a newly signed UK-US trade agreement aimed at easing tariff barriers between the two nations.

Key Highlights:

• Automotive Industry: Car manufacturers can now export vehicles to the U.S. with a reduced 10% tariff, significantly benefiting exporters.

• Aviation Sector: Complete removal of the 10% tariffs on aircraft parts and engines facilitates smoother and more cost-effective trade in this high-stakes industry.

Industry Reaction:

• Nigel Redwood, Managing Director of Revolution Race Cars in Peterborough, England, underscores the substantial impact of these tariff reductions:

  “It does make a substantial difference. So at Revolution Race Cars, we're a low volume race car manufacturer that export probably about 60, 65% of our revenues to the USA. So the increase in tariff had had a big impact on, on our customer base and was very unsettling for, for the last six months.”
  (03:30)

This agreement is seen as a positive step towards strengthening UK-US economic ties, particularly benefiting sectors reliant on international trade. However, uncertainties remain in other areas, such as the ongoing dispute over STE aluminium tariffs.

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3. STE Aluminium Tariffs Remain a Stumbling Block

Despite progress in automotive and aviation trade, the United States continues to impose a 25% tariff on STE aluminium imports from the UK. The situation remains precarious, with the potential for this tariff to double to 50% by July 9 if no resolution is achieved.

Impact on UK Industry:

• Tata Steel and other UK aluminium producers express significant concern, citing the persistent uncertainty as detrimental to their business operations and financial planning. The looming increase in tariffs could severely hamper their competitiveness in the U.S. market.

Market Reactions:

• Stock Markets: China's main stock markets experienced a rebound, closing up 3.10%, buoyed by optimism over the stability of trade talks with the U.S. In contrast, European shares trended downward as investors remain cautious about the unresolved STE aluminium issue and its broader economic implications.

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4. Prada Faces Backlash Over 'Indian-Inspired' Sandals

In a cultural crossover controversy, Italian luxury fashion house Prada has come under fire for unveiling a sandal design that closely resembles the traditional Kolhapuri chappals, handcrafted footwear from India.

Incident Overview:

• During the 2026 summer collection showcase in Milan, Prada presented open-toed leather sandals that bore a striking similarity to the beloved Indian chappals, sparking widespread online outrage.

BBC’s Archana Shukla Reports:

• Cultural Appropriation Concerns: Archana details the backlash from Indian consumers and industry groups, emphasizing the lack of acknowledgment or credit given to the local artisans whose traditional designs inspired Prada’s product.

• Price Disparity: A notable point of contention is the vast price difference. While authentic Kolhapuri chappals retail for approximately $12-$13, Prada’s similar-designed sandals are priced at over $1,000, highlighting perceived exploitation of cultural heritage for luxury branding.

Prada’s Response:

• Facing mounting criticism, Prada issued a statement recognizing the inspiration drawn from Indian traditional footwear. They expressed a commitment to responsible design practices and initiated dialogues with local artisans to foster meaningful collaborations. However, executives have indicated that substantial conversations and potential collaborations are still forthcoming.

Notable Quote:

• Archana Shukla elaborates on the situation:

  “Prada has priced the similar looking slippers, which now they say has been inspired by the Indian footwear, for over $1,000. And that also is something where people have found it appalling… a cultural design from a heritage product has been picked up by a big fashion brand without any acknowledgment and credit.”
  (06:20)

This incident raises important questions about cultural sensitivity, intellectual property, and the ethical responsibilities of global fashion brands in honoring the origins of their design inspirations.

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5. Wimbledon Innovates with Technology: Line Judges Replaced by Cameras

In a historic move, Wimbledon has embraced cutting-edge technology by eliminating human line judges after 148 years. Instead, the prestigious tennis tournament now relies on advanced cameras and sensors to make real-time call decisions.

Technological Advancements:

• Automated Line Judging: The new system aims to increase accuracy and reduce human error in officiating during matches.

• Heat Concerns: With the tournament set to experience its hottest opening day on record, there are concerns about the technology's ability to function optimally under extreme temperatures.

Host’s Takeaway:

• Liana Byrne remarks on the significance of this transition:

  “For the first time in 148 years, there are line judges. They've been replaced by cameras and sensors calling the shots. And since it's set to be the hottest opening day on record, I hope the tech can handle the heat.”
  (07:20)

This shift not only marks a milestone in sports officiating but also reflects the broader trend of integrating technology to enhance fairness and efficiency in athletic competitions.

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Closing Remarks

Liana Byrne wraps up the episode by acknowledging her team and encouraging listeners to stay informed:

“Have a great day. Thanks for listening.”
(07:51)

Additionally, a brief promotion for another Marketplace program, "Make Me Smart," is mentioned, highlighting its focus on unpacking daily news and fostering collective understanding.

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Produced by: Craig Henderson
Edited by: James Graham
Host: Liana Byrne

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This episode of the Marketplace Morning Report provides a comprehensive overview of critical economic and cultural developments, from international trade negotiations and industry-specific impacts to cultural sensitivity in global commerce and technological innovations in sports. Whether you're a business leader, a consumer, or simply a curious listener, this report equips you with the insights needed to navigate the complex web of today's global landscape.

Transcript

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[Liana Byrne]

A Canadian tax targeting U.S. big tech is scrapped at the last minute hello, this is the Marketplace Morning Report and we're live from the BBC World Service. I'm Liana Byrne. Good morning. So Canada has scrapped its planned digital services tax, or dst, just hours before it was due to take effect after President Donald Trump threatened to end trade talks over the issue. The BBC's E. McWilliam reports.

[Ian McWilliam]

The Canadian Department of Finance said in a statement that the digital services tax would be rescinded in anticipation of a comprehensive trade arrangement with the United States. The planned tax would have hit major US Tech companies, including Amazon, Meta and Apple. Ottawa said it was introduced because large technology companies operating in Canada would otherwise not pay tax on revenues generated there. President Trump's threatened new tariffs, however, would have thrown U.S. canada trade into chaos again after months of relative calm.

[Liana Byrne]

That was Ian McWilliam reporting. Earlier, I spoke to Carlene Varian, associate vice president at Summa Strategies and a former chief of staff to then Canadian Prime Minister Justin Trudeau.

[Carlene Varian]

This is not just a Donald Trump and Republican grievance under President Biden. His U.S. trade Representative frequently raised the issue of the DST with Canadian counterparts as a point of disagreement and something that was a challenge for the trading relationship. But I think the president likes to create some drama at the 11th hour and this is the moment when the tax would have been implemented.

[Liana Byrne]

Is that a dangerous precedent, though, if what Trump wants is going to push what Canadian lawmakers do?

[Carlene Varian]

It is a bit complex in that way. I think you see a division among Canadian businesses. On the one hand, Canadians don't want to see themselves punished by the US for attacks that, that has nothing to do with them. But at the same time, you also have businesses who I think directly are impacted by this and that's because many of the tech companies are choosing to pass on the digital services tax directly to their customers.

[Liana Byrne]

Carly and Varian, thank you so much for joining us on Marketplace.

[Carlene Varian]

Thank you for having me.

[Liana Byrne]

Now, while Canada's trading relationship with the US is still up in the air, a UK US trade deal which has lowered some tariffs and imports coming in from Britain is coming in today. Car manufacturers will now be able to export to the US with a reduced 10% tariff. And 10% tariffs have been fully removed from aircraft parts and engines. Nigel Redwood is the managing director of Revolution Revolution Race Cars based in Peterborough in the east of England.

[Nigel Redwood]

It does make a substantial difference. So at Revolution Race Cars, we're a low volume race car manufacturer that export probably about 60, 65% of our revenues to the USA. So the increase in tariff had had a big impact on, on our customer base and was very unsettling for, for the last six months.

[Liana Byrne]

That was Nigel Redwood, the boss of the UK racing car manufacturer Revolution Race Cars. But there's still no breakthrough on STE aluminium. The US continues to impose a 25% tax on those imports and unless a deal is struck soon, that could soon double to 50% on July 9. It's a major worry for UK steel makers like Tata who say the uncertainty is already hurting their business. Now let's do the numbers. China's main stock markets bounce back today on hopes trade talks with the US will hold. The CSI closed up 3.10of a percent and European shares are mostly in the red as investors keep tabs on signs of progress press on trade talks ahead of the July 9 deadline. Now, there's been a bit of controversy in the fashion industry. The Italian fashion house Prada has acknowledged that its new sandal design is Indian inspired after its Milan Runway sparked backlash. The open toe shoes looked strikingly similar to Kalapuri chapels, a traditional handcrafted slipper sold in Indian markets. The BBC's Archana Shukla has been looking into this. Hi, Archana.

[Archana Shukla]

Hi Liana.

[Liana Byrne]

How has the story come about?

[Archana Shukla]

This happened when Prada showcased a pair of leather sandals in their recent summer collection for 2026 in a show in Milan. And those leather sandals, these are open toed sandals. They had a striking resemblance to the Kolhapuri chappals that are a regular footwear here in India. And there has been a lot of uproar online talking about How Prada has taken design elements from India's very heritage sandal, but without giving any acknowledgement or giving any credit to the local artisans. There are very regular chappal slippers that all of us Indians have worn or wear on a regular basis. They're very cheap, but they are handcrafted and they are leather. That's what brings in the unique beauty, and there is a unique design to it.

[Liana Byrne]

What about Prada? What has Prada said about this?

[Archana Shukla]

So after a lot of online backlash and in fact, even the industry groups from India, as well as the Minister of commerce from the state of Maharashtra writing to Prada asking about why there was no acknowledgement or credit given to the local craftsmanship for this product, Prada actually sent out a statement acknowledging that these sandals are, you know, inspired by the traditional Indian footwear and that they are committed to responsible design practices. And in fact, they've said that they are speaking with the local artisans and they want to have a more meaningful conversation and collaboration with the local artisans here. Although they have mentioned that the chappals and the slippers are yet not commercial. And there is still some time before those type of conversations. Go ahead. But you know what the most striking feature is? The lowest price at which you can buy these chappals here is about 12 or $13. But Prada has priced the similar looking slippers, which now they say has been inspired by the Indian footwear, for over $1,000. And that also is something where people have found it appalling. They've also found it very striking that a cultural design from a heritage product has been picked up by a big fashion brand without any acknowledgment and credit.

[Liana Byrne]

I guess that's just the price of a logo. Okay, the BBC's Archana Shukla, thank you so much for joining us on Marketplace.

[Archana Shukla]

Thank you, Liana.

[Liana Byrne]

And finally, the tennis tournament Wimbledon is underway in London. And for the first time in 148 years, there are line judges. They've been replaced by cameras and sensors calling the shots. And since it's set to be the hottest opening day on record, I hope the tech can handle the heat. And that's it from the Marketplace morning report from the BBC World Service. Craig Henderson is my producer, James Graham's the editor, and I'm Liana Byrne. Have a great day. Thanks for listening.

[Rima Reyes]

Hey, everyone, I'm Rima Reyes, and I'm excited to join Kimberly Adams on Make Me Smart. Together we'll unpack the day's news, whether it's a tariff switch. Up the latest on Trump's immigration policy or the future of clean energy. Join us each weekday so we can make sense of it all together. Because none of us is as smart as all of us. Listen to Make Me Smart. Wherever you get your podcasts.