President Donald Trump abruptly ended all trade negotiations with Canada last week after Ottawa moved forward with a digital services tax targeting American tech companies. Within 48 hours, Canada rescinded the tax, clearing the way for talks to resume.
In a June 27 post on Truth Social, Trump slammed the Canadian measure as “a direct and blatant attack on our Country,” and announced the immediate termination of trade discussions. He also accused Canada of mimicking the European Union and warned that retaliatory tariffs would be announced within seven days.
“We have just been informed that Canada… is putting a Digital Services Tax on our American Technology Companies,” Trump wrote. “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.”
The tax, set to take effect June 30, would have imposed a 3% levy on digital service revenues earned from Canadian users, and was retroactive to 2022. U.S. firms like Google, Amazon, and Netflix would have faced a $2 billion bill.
Industry voices backed Trump’s decision, saying the Canadian tax unfairly targeted U.S. companies.
“This tax unfairly singles out American firms while local competitors skate by,” said John Czwartacki of Public Policy Solutions. “President Trump is right to call them out and force this to change.”
Michael Lucci, CEO of State Armor, echoed the sentiment: “Canada is not holding up their end of our partnership, and President Trump is right to stand up for American interests.”
Facing mounting pressure and a collapsed trade agenda, Canadian Finance Minister François-Philippe Champagne reversed course on June 29, announcing that the tax would be scrapped in order to resume negotiations.
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress,” Champagne said.
Canada’s reversal came amid concerns that Trump’s threat could jeopardize a July 21 deadline for a U.S.-Canada trade agreement, set earlier this month at the G7 summit in Alberta.
Trump told reporters that the United States holds the leverage in any negotiation: “We have all the cards. We do a lot of business with Canada… When you have that circumstance, you treat people better.”
The Canadian government had previously claimed the tax was necessary to make big tech companies “pay their fair share,” and estimated the policy would raise $7.2 billion over five years. But after Trump’s announcement, that plan quickly unraveled.
While Trump’s administration has already imposed tariffs on Canadian steel, aluminum, and other goods, trade under the USMCA agreement had continued. That changed with Canada’s digital tax gamble—and Trump’s swift and decisive response.