In a dramatic escalation of tensions between the United States and Canada, U.S. President Donald Trump has officially terminated all trade negotiations with Canada. The announcement came via Trump's Truth Social account on June 27, 2025, citing Canada's recently implemented Digital Services Tax (DST) as a direct and unfair attack on American technology companies.
The DST, which imposes a 3% levy on revenue generated by large digital services companies from Canadian users, has been retroactively applied to cover earnings from 2022 onward. The tax primarily affects major U.S. firms such as Google (Alphabet), Amazon, Meta, Apple, and Microsoft — all of which generate significant revenue from digital services in Canada.
Trump criticized the move as egregious and warned of imminent retaliatory tariffs on Canadian goods. He accused the Canadian government of unfairly singling out American companies and vowed to respond with economic measures that would counter the impact of the tax. The retaliatory actions are expected to be announced within a week.
Trade experts estimate that the new tax could cost U.S. tech firms over \$3 billion in initial retroactive payments, followed by annual charges of more than $1 billion. Industry groups in the U.S., including the Computer & Communications Industry Association (CCIA), welcomed Trump's tough stance, claiming the Canadian policy undermines fair trade and digital innovation.
Canada, however, remains firm in its decision. Prime Minister Mark Carney defended the tax, stating that it aligns with international efforts under the OECD to fairly tax digital commerce. He reiterated that Canada is open to complex negotiations but emphasized that the country's fiscal policies are not up for sale.
The collapse of trade talks marks a significant setback in North American trade relations. Markets initially reacted with caution; while U.S. indices like the S&P 500 and Nasdaq experienced brief volatility, they ultimately closed at record highs. However, analysts warn of potential long-term consequences, including increased costs for consumers and businesses, disrupted supply chains, and strained diplomatic ties.
As global attention turns to the standoff, other countries considering similar digital taxes are closely watching the outcome. This development also raises questions about the future of multilateral efforts to establish a unified approach to digital taxation. While Canada hopes for continued dialogue, Trump's firm line suggests a prolonged period of trade friction could lie ahead.