Trump slams Canada’s digital tax, prompting surprise policy reversal
Canadian Prime Minister Mark Carney backs down on controversial tech tax after Trump’s threats spark trade standoff between key allies
Canada’s new 3% digital services tax targeting U.S. tech giants sparked a fierce backlash from Donald Trump, triggering threats of trade penalties and a sudden reversal by Prime Minister Mark Carney.
A simmering dispute between two long-time allies flared into public view last week after U.S. President Donald Trump sharply condemned a Canadian tax aimed at major American tech firms. Canada had announced it would begin enforcing a 3% digital services tax on companies like Amazon, Meta, and Google, applying it retroactively to 2022. The move could have cost U.S. companies up to $2 billion — and it didn’t sit well with Trump.
Calling it a “blatant attack” on U.S. businesses, Trump issued a warning on June 27 via Truth Social, accusing Canada of copying European tax models and vowing to halt trade talks immediately.
How did Trump respond?
In a characteristically combative tone, Trump declared that Canada would soon face retaliatory tariffs. “We will let Canada know the Tariff that they will be paying… within the next seven day period,” he wrote. He also accused Canada of longstanding unfair practices in agriculture and warned that “it’s not going to work out well for Canada.”
He later reinforced his stance in comments to reporters, suggesting Canada would be wise to “remove the tax” if it wanted to avoid serious economic consequences.
Mark Carney, 60, maintained a composed tone during the rising tensions. When asked about Trump’s threats, he said only: “We’ll continue to conduct these complex negotiations in the best interests of Canadians.”
But behind the scenes, the rhetoric was having an impact.
Canada backs off under pressure
Just two days after Trump’s public statements, a late-night phone call between Trump and Carney appeared to shift the tone of the dispute. That same evening, Ottawa unexpectedly paused its digital tax rollout — one day before the first payments were due.
“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,” Carney said in a statement.
The sudden reversal suggests Canada may be hoping to avoid a larger confrontation with one of its top trading partners. In 2023, U.S.-Canada trade totaled more than $760 billion.
While Trump’s aggressive posture drew criticism from some quarters, it appears to have pressured Ottawa into rethinking a policy that risked disrupting cross-border business ties. Whether this signals a long-term shift or a temporary retreat remains to be seen.
Even close allies can clash when money and policy collide. In this case, tough words gave way to fast diplomacy — and a major policy shift on the eve of enforcement.
