What began as Canada’s attempt to tax American technology companies has evolved into a full-scale diplomatic crisis, with President Trump announcing the complete termination of trade negotiations between the two countries. The move represents one of the most significant disruptions to US-Canada economic relations in recent years.
The controversial digital services tax will cost major American tech companies an estimated $3 billion, with first payments due Monday. Companies like Alphabet, Amazon, and Meta now face not only this financial burden but also the uncertainty of deteriorating trade relations between their home country and a key northern neighbor.
The breakdown comes despite recent diplomatic progress that seemed to promise a new era of cooperation. At the G7 summit in Alberta, Canadian Prime Minister Mark Carney had secured Trump’s commitment to pursue a comprehensive trade deal within 30 days, creating optimism about resolving longstanding disputes.
However, Canada’s decision to proceed with the digital tax has completely derailed these efforts. Trump’s response was swift and uncompromising, taking to Truth Social to announce not only the end of negotiations but also the promise of retaliatory tariffs within a week. His message included sharp criticism of Canada’s broader trade practices, including dairy tariffs that he claims have burdened American farmers for years.