New Clash Between Close Allies
Just when tensions seemed to ease, a fresh dispute erupted between two longtime allies. President Donald Trump lashed out, accusing Canada of a “blatant a**ack.” The conflict reignited trade tensions between the U.S. and Canada.
Leaders Known for Directness
Both leaders share a blunt style. Canadian Prime Minister Mark Carney, 60, and U.S. President Donald Trump, 79, once showed mutual respect. Trump admired Carney’s banking career. However, that calm appears to be unraveling rapidly.
The Trigger: Digital Services Tax
The spark? Canada’s new 3% digital services tax on major tech firms like Amazon, Meta, Google, Uber, and Airbnb. This tax is retroactive to 2022. According to NBC News, American tech giants face a $2 billion tax bill by month-end if they earn over $14.6 million from Canadian users annually.
Trump’s Fiery Response
Unsurprisingly, Trump reacted strongly. On June 27, he posted on Truth Social:
“Canada, a very difficult country to trade with, has charged our farmers up to 400% tariffs on dairy products for years. Now, they are imposing a Digital Services Tax on American tech companies. This is a direct and blatant a**ack on our country… We are terminating ALL trade discussions with Canada immediately.”
A Sharp Shift in Relations
Trump’s words signaled a potential trade freeze with one of America’s biggest economic partners. Last year, U.S.-Canada trade exceeded $762 billion, per the U.S. Trade Representative.
Carney’s Calm Response
Carney stayed composed. He stated:
“We’ll continue to conduct these complex negotiations in the best interests of Canadians.”
Trump later doubled down, warning:
“We have economic power over Canada. They were foolish to do this… It’s not going to work out well for them.”
When asked about restarting talks, he said it didn’t matter to him and predicted Canada would eventually remove the tax.
Pressure from U.S. Lawmakers
U.S. lawmakers urged Trump to act quickly against what they called an “unprecedented, retroactive tax.” They warned it might encourage other countries to impose similar taxes on U.S. firms.
Trump Criticizes Europe Too
Trump also criticized Europe’s similar digital tax policies:
“They have been unbelievably bad to us… They’re nice to me because I understand the system and hold the cards.”
He added he preferred the U.S. to control any penalties on American companies.
Canada Backs Down
Following these events, Trump’s post triggered a high-stakes phone call with Carney on Sunday night. That same evening, Ottawa announced it would pause its digital services tax. This move came just one day before the first payments were due.
Carney said:
“Today’s announcement supports resuming negotiations toward the July 21, 2025, timeline set at this month’s G7 Summit in Kananaskis.”
