Trump demands Canada scrap its digital services tax before U.S. trade talks resume, escalating tensions over tariffs and tech levies.
Tensions Rise as Trump Suspends Negotiations
U.S. President Donald Trump announced Friday he is suspending all trade negotiations with Canada until Ottawa withdraws its digital services tax (DST). Speaking from the Oval Office, Trump accused Canada of unfairly targeting U.S. technology giants and warned of further tariffs on Canadian goods. The move threatens ongoing efforts to resolve a broader trade dispute that has already disrupted industries and cost jobs on both sides of the border.
Canada’s New Tax Sparks U.S. Anger
The DST, set to take effect June 30, imposes a 3% levy on revenues earned from Canadian users by large digital companies, including Amazon, Google, Meta, Uber and Airbnb. Passed last year with a delayed start date, the tax is retroactive, leaving U.S. firms with a collective bill of about $2 billion USD. Ottawa introduced the measure to modernize its tax system and ensure global firms contribute fairly, arguing that such companies have long avoided taxes in Canada despite significant business activity.
Negotiations Stalled Despite Recent Progress
Trade talks had been advancing after Prime Minister Mark Carney and Trump agreed at last week’s G7 summit to work toward a resolution within 30 days. Canadian officials, including Trade Minister Dominic LeBlanc, expressed optimism about the tone of discussions as recently as Friday morning. However, Trump’s afternoon remarks — and his threat of additional tariffs — abruptly shifted the dynamic, leaving the future of the negotiations uncertain.
A Familiar Flashpoint in Canada-U.S. Trade Relations
The DST has been a point of friction for years, with successive U.S. administrations opposing unilateral digital taxes. Former President Joe Biden’s envoy to Canada had previously warned of retaliatory measures. While Canada had participated in OECD talks on a coordinated global approach, it opted to move ahead independently, citing slow progress internationally. Trump’s latest comments repeat longstanding grievances about Canada’s dairy tariffs, though trade experts note these claims misrepresent Canada’s supply management system and existing tariff arrangements.
Canadian Leaders Signal Resolve Amid U.S. Pressure
Prime Minister Carney and Foreign Affairs Minister Anita Anand have so far resisted calls to abandon the DST. Anand emphasized Canada’s commitment to negotiating a deal that supports Canadian workers while diversifying trade relationships to reduce dependence on the U.S. She pointed to the recently signed New EU-Canada Strategic Partnership as part of that effort. Meanwhile, business leaders like Candace Laing of the Canadian Chamber of Commerce caution that trade talks often face setbacks, urging both sides to stay focused on reaching a solution.
Uncertain Path Ahead as Deadlines Loom
With Canada’s DST set to take effect within days and Trump threatening further tariffs, the window for compromise appears narrow. Canada’s government has not indicated it plans to reverse the tax, setting up a potential escalation in cross-border tensions. Both nations now face the challenge of balancing domestic priorities with the need to preserve vital economic ties in the weeks ahead.
