Trump halts U.S.-Canada trade talks over Canada's digital services tax on American tech giants
U.S. President Donald Trump abruptly suspended all trade negotiations with Canada on Friday, citing Ottawa’s decision to enforce a long-debated digital services tax targeting American technology companies. The move reignites a cross-border tariff dispute and threatens to derail progress toward a new North American trade and security pact.
Canadian Prime Minister Mark Carney met with President Trump on May 6.
Anna Moneymaker/Getty Images
“We have just been informed that Canada, a very difficult Country to TRADE with… has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump posted on Truth Social.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,” he added.
The Canadian government’s digital services tax (DST) is a 3% levy on revenues generated by large foreign digital platforms from Canadian users. It applies retroactively to 2022 and is estimated to cost U.S. tech firms, including streaming giants and e-commerce platforms, up to $2 billion annually.
The tax officially goes into effect on June 30, marking a major turning point in Canada’s policy toward digital taxation. The Canadian Finance Ministry has defended the tax as a fair and temporary measure until a global digital taxation agreement can be implemented under OECD frameworks.
While Ottawa introduced the legislation last year, collection was deferred to allow for trade negotiations. Trump’s decision now appears to shatter hopes for a quiet resolution, just weeks after the president and Canadian Prime Minister Mark Carney agreed during the G7 Summit in Alberta to finalize a new trade and defense pact by mid-July.
The new rift places further strain on U.S.-Canada economic relations. American digital platforms—including streaming services, app marketplaces, and social media firms—are major players in the Canadian market, and the tax has long been a flashpoint in bilateral trade conversations.
For years, Canadian cultural groups have urged the federal government to require foreign tech firms to reinvest a share of their profits into local content. The DST was seen as a mechanism to enforce that objective. However, the U.S. has consistently argued that such targeted digital taxes discriminate unfairly against American companies.
Despite Trump’s sharp rhetoric, Canadian officials appeared measured in response. Prime Minister Carney stated, “We will continue to conduct these complex negotiations in the best interest of Canadians.” Candace Laing, CEO of the Canadian Chamber of Commerce, which opposes the tax, added, “The tone and tenor of talks has improved in recent months, and we hope to see progress continue.”
Still, Trump’s withdrawal from trade discussions—and the threat of retaliatory tariffs—adds a layer of uncertainty for businesses and markets on both sides of the border. Analysts suggest that the current clash could be the prelude to more intense bargaining, as both nations remain economically interdependent.
The U.S.-Canada trade relationship, valued at over $700 billion annually, has weathered previous storms—including the renegotiation of NAFTA into USMCA—but the introduction of targeted digital taxes and a return to tariff brinkmanship poses fresh risks to economic stability in both countries.
