In a Friday afternoon post on Truth Social, President Trump declared he was “terminating” trade talks with Canada, which have been ongoing for several months, “effective immediately.” The reason, he said, was because Canada had placed a “Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country.” He added that we will notify Canada within the next week “the Tariff that they will be paying to do business” with the U.S.
According to CNBC, the digital services tax was enacted in 2024 and “applies retroactively to 2022.” The first payments are due on Monday.
The U.S. has reportedly pressured Canada to withdraw the tax, but Ottawa has remained firm. While details of the story remain scarce, indications suggest that Trump left last week’s G7 summit with a significantly different understanding of where things stood.
The Wall Street Journal reported:
The first payments from tech companies to the Canadian government over the digital-service tax, a levy on revenue companies make from Canadian users, are due on Monday. The tax would likely cost U.S. tech companies billions of dollars. It includes retroactive taxes on sales going back to 2022, and industry groups estimate the initial payment could total up to $3 billion, with subsequent annual payments north of $1 billion.
According to CNN:
Digital services taxes are a way for countries to tax online services, in contrast to taxes on physical products. Countries with these taxes can collect revenue from large companies that operate online — even if the business is unprofitable. American firms, especially Big Tech companies such as Meta, Apple, Google, Amazon and Microsoft, are disproportionately affected by DSTs, according to a report published last year by the nonpartisan Congressional Research Service.
Canada is America’s second largest trading partner (after Mexico). According to data from the Office of the United Stated Trading Representative, total goods traded between the U.S. and Canada in 2024 was “an estimated $762.1 billion.”
The stock market averages, which had been up by more than 1% throughout the day plunged on Trump’s announcement, but have begun to rebound since.
Elizabeth writes commentary for Legal Insurrection and The Washington Examiner. She is an academy fellow at The Heritage Foundation. Please follow Elizabeth on LinkedIn or X.
CLICK HERE FOR FULL VERSION OF THIS STORY