President Donald Trump unexpectedly called off trade talks with Canada after the country moved forward with a digital services tax targeting large American tech firms.
On Friday, Trump took to Truth Social to express strong opposition to the new tax, calling it a clear strike against the US and warning that he plans to introduce new tariffs on Canada within the week.
"Based on this egregious tax, we are hereby terminating ALL discussions on trade with Canada, effective immediately," Trump wrote.
According to USA Today, he warned that Canada will soon learn "the tariff they will be paying to do business with the United States."
The dispute centers on Canada's Digital Services Tax (DST), which applies a 3% tax on companies with significant online profits made in Canada. The law targets platforms that profit from digital ads, user data, and online marketplaces.
Critics say the tax unfairly targets US-based companies like Amazon, Meta, and Google. Canadian officials estimate that up to 90% of tax revenue would come from American firms.
Trump had previously shown optimism about working with Canadian Prime Minister Mark Carney, saying on June 16, "I'm sure we can work something out." However, talks unraveled after Canada refused a 30-day delay in the tax's rollout.
"They're taxing American companies who don't even have a real presence in Canada," said White House economic adviser Kevin Hassett. "They're going to have to remove it, and I think they know that."
‘Canada has been VERY DIFFICULT to deal with over the years' — Trump
— The Sacred Blue Tent (@SabrinaGal182) June 27, 2025
But the US 'has all the cards' and 'such power over Canada'
Trump 'will STOP all negotiations with Canada until they straighten out their act'@MTodayNews pic.twitter.com/QdKBY0Svyb
US Industry Leaders Back Trump's Action Against Canada's Tax
Trump later doubled down on his position, telling reporters: "We have all the cards. Most of their business is with us." He said he would prefer not to use that power, but would if necessary.
Canada passed the DST law after long public discussions starting in 2021. It is set to take effect this weekend, with payments due Monday.
Because the law is retroactive, some US tech companies could owe Canada up to $3 billion, according to industry groups, Politico said.
Industry leaders and lawmakers in the US were quick to support Trump's move. "Canada's digital tax defies its USMCA commitments and unfairly targets US businesses," said Megan Funkhouser of the Information Technology Industry Council.
Ontario Premier Doug Ford also expressed concern, saying the tax "puts millions of Canadian jobs at risk."
Despite Trump's strong stance, Canada's Finance Minister François-Philippe Champagne confirmed, "We're going ahead with the DST. This is not unique to Canada. Many countries have similar taxes."
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