Canada has avoided a 50% tariff hike, after US President Donald Trump paused the measure at the eleventh hour and claimed progress on a pair of key negotiating points.
As Trump temporarily halts one set of tariffs, the UK government has suggested it is open to talks on another of Trump’s major bugbears: the digital services tax on US tech giants and social media companies.
Trump pauses tariffs again
US President Donald Trump has paused his latest set of tariffs against Canada, citing progress on a controversial energy project.
“I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three-day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!”
He claimed that the Keystone XL, a controversial oil pipeline that would have ran between Canada and the US, “maybe be awoken”. Part of a wider Keystone Pipeline, the Keystone XL route would have run from Alberta in Canada through the US sates of Montana and South Dakota before finishing in Nebraska.
Former US President Barack Obama blocked the project before it was eventually cancelled by President Joe Biden.
The pause in tariffs is set to last for only three days, according to a White House statement. The same statement added that the delay was due to a Canadian commitment to “remove the discriminations or unreasonable and unequal impositions at issue.”
"Substantial progress has been made, although there is important work still to be done," said Canadian prime minister Mark Carney.
"While we continue this work, Canada remains focused on building a stronger, more independent, and more competitive economy at home."
The delay came into effect only hours before the deadline of 12:01am Eastern Standard Time.
UK open to discussing digital tax
The UK said it is “open to discussing” US concerns about a digital service tax, as Trump’s chief trade negotiator attempts to up the pressure on Westminster.
On Monday, US Trade Representative Jamieson Greer told The Times that a threat to scrap a trade deal and impose 100% tariffs on the UK was “not a bluff”.
Greer also repeated Trump’s concerns over the UK’s proposed tax on US tech giants but said he would not set “artificial deadlines” by which the measure should be rowed back.
A UK spokesperson told Politico Morning Trade that the tax was an “interim measure” and that “we are still committed to removing it once a global solution is in place”.
The measure would apply a 2% levy on the revenues of search engines, social media services and online marketplaces. One government report estimated that it raised around £800m in 2024-2025, with the stated aim of reducing multinational profit systems and protecting the tax base of the UK “in the interim”.
Inflation rises but food price growth ‘benign’
UK inflation has risen by 2.9%, driven by a spike in energy bills.
The latest report from the Office for National Statistics (ONS), found that the Consumer Prices Index (CPI) measure of core inflation rose by 2.9% in July. This was up by 2.6% on the previous month, driven in part by the rising cost of electricity and gas.
The June figure was a 15-month low, while the ongoing impact of the US-Israel/Iran war on energy markets and supply chains continued to drag.
The ONS also found that food inflation rose by 1.3%, down from 1.7% in the previous month.
Dutch bank ING said it was “surprising” just how “benign food inflation is right now”.
“Prices here were flat on the month, having fallen in month-on-month terms in the two prior readings, something that is highly unusual”, said ING economist James Smith.
“A quick glance at producer prices suggests consumer food inflation could theoretically even go negative in annual terms over the next few months.”
Other trade headlines
· The US has announced new sanctions on top figures from the International Criminal Court, drawing criticism from nations like Japan and Senegal
· A report from the Food Foundation argued that the UK could protect its food supply chains by growing more of its own food
· A former Ukrainian defence minister, sacked by Volodymyr Zelensky, has called for a wartime Presidential election
Yesterday in Trade
· A leading European trade minister said the EU is “determined” to have its next summit with the UK “in the autumn”
· The government announced a new AI Growth Zone in the Scottish county of Lanarkshire
· Oil prices jumped after the expiry of the US-Iran ceasefire
