Former U.S. President Donald Trump has sharply criticized Canada over its newly implemented Digital Services Tax (DST), announcing an immediate halt to all trade negotiations with Ottawa. In a fiery post on Truth Social, the 79-year-old Republican declared that the U.S. would unveil a new tariff rate within a week in retaliation.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump wrote, referring to the DST as an unfair move targeting American technology firms.
Canada Responds with Caution
Canadian Prime Minister Mark Carney responded to the development with restraint, saying his government would continue to pursue trade negotiations.
“We will continue to conduct these complex negotiations in the best interest of Canadians,” Carney stated, noting that he had not spoken to Trump that day regarding the issue.
What is Canada’s Digital Services Tax?
The DST, introduced by the Canadian government, imposes a 3% tax on revenue generated from digital services offered to Canadian users. The tax:
- Applies retroactively from January 1, 2022.
- Is payable by June 30, 2025.
- Targets companies with:
- Global revenue exceeding €750 million (~US$801 million), and
- Canadian digital service revenue above C$20 million (~US$14.8 million).
This primarily affects large U.S. tech firms, whose vast digital operations generate billions in Canada.
U.S. Tech Giants in the Crosshairs of DST
Here are the major American firms expected to bear the brunt of Canada’s DST:
- Google (Alphabet Inc.)
Google faces the highest exposure due to its dominance in digital advertising, particularly through Google Ads and YouTube. The DST directly targets ad revenue derived from Canadian users. - Meta (Facebook & Instagram)
Meta’s Canadian revenue from social media engagement and targeted advertisements is substantial. The DST taxes both user data monetization and ad sales. - Amazon
The DST affects Amazon’s online marketplace services and cloud computing arm (AWS). Revenues from sales commissions, advertising on the platform, and data services are taxable. - Apple
Apple’s App Store, Apple Music, and iCloud services generate digital marketplace and licensing income that falls within DST parameters.
Trade Tensions Likely to Escalate
Trump’s abrupt withdrawal from trade talks and the looming threat of retaliatory tariffs underscore growing tensions between Washington and Ottawa. While the DST has long been debated globally, most countries paused its enforcement amid international efforts led by the OECD to reach a consensus. Canada’s decision to enforce DST retroactively has drawn particular ire from Washington.
With Trump warning of consequences and Carney remaining diplomatically firm, this dispute may set the stage for broader U.S.-Canada trade friction—especially as both countries gear up for key economic decisions in the coming months.
