In a dramatic escalation of tensions, U.S. President Donald Trump announced the immediate termination of trade negotiations with Canada in response to Ottawa’s new digital services tax targeting American tech giants. The move, posted on Trump’s Truth Social platform, marks the revival of a trade war between the two nations, shattering months of improved relations following the election of Canadian Prime Minister Mark Carney.Trump called Canada “a very difficult Country to TRADE with” and labeled the 3% digital services tax a “direct and blatant attack” on American technology companies. The tax, which applies to firms like Amazon, Google, Meta, Uber, and Airbnb, levies a charge on revenue generated from Canadian users and includes a retroactive bill estimated at $2 billion USD due by month’s end. Trump vowed to impose new tariffs on Canadian imports within the next seven days, though specifics remain undisclosed.
What is Canada’s Digital Services Tax
The digital services tax, enacted despite U.S. objections, targets both Canadian and foreign businesses engaging with online users in Canada. The digital services tax applies to Canadian and foreign businesses that engage with online users in Canada. It will apply to companies like Amazon, Google, Meta, Uber and Airbnb with a 3% levy on revenue from Canadian users. It will apply retroactively, leaving U.S. companies with a $2 billion U.S. bill due at the end of the month.Canadian Finance Minister François-Philippe Champagne confirmed last week that Ottawa would move forward with the tax, brushing off Silicon Valley’s opposition and U.S. pressure to reconsider.The announcement sent ripples through financial markets, with the Canadian dollar dropping 0.7% against the U.S. dollar on the same day. The decision threatens to disrupt the economic ties between the U.S. and its northern neighbor, reigniting trade hostilities and raising concerns about broader economic fallout.
