OTTAWA--U.S. Commerce Secretary Howard Lutnick has warned that Canada's national sales tax will be subject to retaliation, adding to the list of tariffs the Trump administration is seeking to impose on its northern neighbor and major trading partner.
"We're supposed to have a free trade agreement with Canada, but they have a 5% national tax," Lutnick told Fox News, in an interview following the first cabinet meeting of the Trump administration. "They tax so many different things. It's outrageous. They basically cheat around the sides, and then when we don't act, they stop cheating around the sides. They cheat right down the middle. And the President is sick and tired of it."
A spokesman for Canadian Finance Minister Dominic LeBlanc declined comment.
This month, President Trump ordered federal agencies to explore how to adjust U.S. tariffs to match those of other countries, also known as reciprocal tariffs. Trump's trade advisers had targeted value-added taxes, or VATs, among European Union members. Lutnick's comments confirm Canada's national-sales tax, known locally as the GST, is also in the White House's crosshairs.
Canada levies a 5% sales tax on all goods and services and is a major source of revenue for the federal coffers--raising about 51 billion Canadian dollars, or the equivalent of US$35.57 billion, in the 2023-24 fiscal year.
The White House had previously singled out Canada's digital-services tax for retaliation, seeking to get Canadian authorities to back off its 3% levy on revenue earned in the country by big technology companies. Lutnick said the so-called reciprocal tariffs could start as early as April 2.
Meanwhile, the Trump administration is set to impose a hefty 25% tariff on nonenergy imports from Canada, alongside a 10% duty on U.S.-bound energy products from its northern neighbor, on March 4 unless Ottawa can demonstrate that it's taken steps to strengthen border security and fight fentanyl trafficking. "We'll just see if they did a good job or not. We'll see," Lutnick said, of Canada's efforts.
The Trump administration is also proposing a 25% tariff on all steel and aluminum imports--and Canada is the largest foreign supplier to the U.S. of both metals.