Trump Ends Canada Trade Talks Over Digital Services Tax on US Tech Giants

In a dramatic escalation of trade tensions, Trump Ends Canada Trade Talks Over Digital Services Tax on US Tech Giants. U.S. President Donald Trump has announced the immediate termination of trade talks with Canada, citing the country’s newly enforced Digital Services Tax (DST) as a “direct and blatant attack” on American tech companies. The move comes just days before the June 30, 2025 deadline, when the first payments under the DST are due retroactively covering digital revenues from January 1, 2022.

“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump posted on Truth Social, further warning that new tariffs on Canadian goods would be announced within the week. This development threatens to derail a pending U.S.-Canada trade deal that was expected to conclude in mid-July, and could ignite a larger dispute over how the global digital economy should be taxed.

Trump Ends Canada Trade Talks Over Digital Services Tax on US Tech Giants

What Is Canada’s Digital Services Tax?

The Digital Services Tax is a 3% levy on specific digital revenues earned from Canadian users. Passed by Parliament in June 2024, the law was designed to ensure that foreign tech giants profiting from Canadian consumers contribute to the national tax base.

To qualify for the DST, companies must meet both of the following thresholds:

• Global revenues of €750 million (~$801 million USD) or more
• Canadian digital services revenue exceeding CAD 20 million (~$14.8 million USD)

What services are taxed?

• Online marketplace platforms (e.g., Amazon)
• Social media services (e.g., Meta platforms like Facebook and Instagram)
• Digital advertising platforms (e.g., Google Ads, YouTube)
• Licensing or selling of user data

According to Canada’s Parliamentary Budget Office, the DST is projected to generate CAD 7.2 billion over five years roughly CAD 875 million annually.

Why Is the U.S. Outraged?

The backlash from Washington is rooted in the fact that the majority of the companies impacted by the DST are American tech giants.

Industry groups like the Computer and Communications Industry Association (CCIA) estimate that U.S. firms could owe up to $3 billion annually in new Canadian taxes.

The U.S. Trade Representative (USTR) has consistently argued that unilateral digital taxes imposed by foreign governments unfairly target American businesses and violate global trade norms.

“This tax is in clear violation of Canada’s obligations under the USMCA and WTO,” the U.S. Chamber of Commerce stated, referring to the United States-Mexico-Canada Agreement and the World Trade Organization.

In August 2024, then-USTR Katherine Tai formally requested dispute consultations under the USMCA, asserting that Canada’s DST discriminates against U.S. companies and violates commitments on Cross-Border Trade in Services and Investment.

Which US Tech Giants Are Affected by the DST?

Here’s a look at the American tech behemoths most affected by Canada’s Digital Services Tax:

1. Google (Alphabet Inc.)

Google stands to lose the most given its domination of Canada’s digital advertising space. Both Google Ads and YouTube generate billions in revenue by targeting Canadian users.

2. Meta (Facebook & Instagram)

Meta’s platforms are deeply reliant on user data and targeted advertising, both of which fall squarely under the DST’s purview.

3. Amazon

Amazon’s e-commerce marketplace and cloud services (AWS) are both DST-eligible. Its vast Canadian user base makes it a key target for revenue collection.

4. Apple

Apple’s App Store, iCloud, and Apple Music provide digital services to millions of Canadians. Revenue from app sales, content subscriptions, and data storage are now taxable.

Trump’s Retaliation: Tariffs Incoming

President Trump responded in characteristically aggressive fashion. After announcing the end of trade talks, he warned that Canada would soon be informed of the new tariffs it will face to access the American market.

“Canada will soon find out the levy it needs to pay to do business in the United States,” he said. “They are a very difficult country to trade with.”

Since returning to the White House in January 2025, Trump has already:

• Doubled steel and aluminum tariffs
• Threatened new levies on auto parts and vehicles
• Imposed a 10% tariff on nearly all imports from global partners

Canada has been particularly affected. In response, Ottawa recently announced potential countermeasures, including adjusted 25% tariffs on U.S. steel and aluminum, to take effect if a deal is not reached within 30 days.

Canada Refuses to Yield

Despite the mounting pressure from Washington, Canadian officials are standing firm.

“We will conduct these complex negotiations in the best interest of Canadians,” said Prime Minister Mark Carney.

Finance Minister Francois-Philippe Champagne echoed that sentiment: “This is a matter of fairness. Canadian users create value. That value should be taxed in Canada.”

Canada argues that the global OECD-led initiative to develop a uniform digital taxation system has stalled, forcing it to act unilaterally.

The DST, Canadian officials insist, is not discriminatory but rather a temporary stopgap until multilateral rules are in place.

A History of Trump’s Trade Tactics

This is not the first time Trump has clashed with Canada over trade policy. During his first term and since returning to office, Trump has used economic pressure as a tool of negotiation.

Past actions include:

• Threatening “economic annexation” of Canada via trade
• Imposing tariffs on Canadian energy, autos, aluminum, and steel
• Using social media threats to extract concessions from trade partners

According to U.S. Census Bureau data:

• In 2024, Canada exported $412.7 billion in goods to the U.S.
• It imported $349.4 billion from the U.S.

The U.S. is Canada’s largest trading partner, and the two economies are deeply intertwined particularly in automobile manufacturing, where parts cross borders multiple times before assembly.

Experts warn that renewed tariffs could disrupt supply chains, increase costs for consumers, and slow economic growth on both sides.

Analysts and Business Leaders React

The Canadian business community expressed caution but emphasized the importance of maintaining momentum in trade discussions.

“Our position on the DST has been consistent,” said Candace Laing, President of the Canadian Chamber of Commerce. “But it’s a pivotal time for Canada-U.S. relations.”

Vina Nadjibulla, VP at the Asia Pacific Foundation of Canada, said: “Canada will need to work behind the scenes to find an off-ramp without giving in to Trump’s demands.”

Trade expert Rachel Ziemba called Trump’s move unsurprising and suggested it may also be aimed at sending a message to the European Union, which is also grappling with DST issues.

The Global Picture: Digital Taxation in Transition

Canada is not alone in introducing a Digital Services Tax. Other countries, including:

• France
• Italy
• United Kingdom
• India

have also imposed similar levies to capture value from non-resident digital giants profiting within their jurisdictions.

Critics argue that these unilateral measures:

• Undermine OECD efforts to build a cohesive global tax regime
• Risk trade retaliation and economic fragmentation
• Could lead to a patchwork of incompatible national tax laws

The OECD’s Pillar One and Pillar Two frameworks meant to reallocate taxing rights and introduce a global minimum tax have faced repeated delays.

Canada’s DST was intended as a temporary measure until a global agreement could be finalized, but that path now looks increasingly uncertain.

Is the US-Canada Trade Deal Dead?

Only weeks ago, Trump and Carney appeared cordial at the G7 summit, and officials hinted that a new bilateral trade deal could be reached by mid-July.

“This is a serious disruption,” said Inu Malak, fellow at the Council on Foreign Relations. “But it might also create pressure to finalize a deal more quickly.”

Malak believes that while Trump’s tactics are high-risk, they could force faster concessions or negotiation movement especially if both sides see economic fallout from prolonged uncertainty.

Conclusion: Fairness or Fight?

As the June 30 DST deadline looms, it’s clear that U.S.-Canada relations are entering a volatile phase. Trump’s dramatic exit from trade negotiations paired with looming tariffs could mark the start of a prolonged economic confrontation.

While Canada insists it is standing up for tax fairness, the U.S. sees the DST as a hostile, protectionist maneuver. The fallout will not just affect tech giants but could ripple across supply chains, consumer prices, and economic stability. This isn’t merely a tax dispute. It’s a defining moment in the battle over who sets the rules in the digital age and whether small economies can push back against tech titans and trade superpowers alike.

Also Read: India-Canada Diplomatic Reset at G7 Summit Marks New Era of Cooperation

Also Read: What was Canada’s digital tax that Trump threatened trade talks over?