President calls digital services tax on US tech giants ‘direct and blatant attack’ on America as first $2 billion payment due Monday
Donald Trump has dramatically terminated all trade discussions with Canada after Ottawa refused to back down on a controversial digital services tax targeting American tech giants – with the first payments worth billions due on Monday.
The President announced the bombshell decision on Truth Social Friday afternoon, calling Canada’s 3% tax on US technology companies a “direct and blatant attack on our country” and warning he will announce new retaliatory tariffs within seven days.
The explosive move comes just three days before Canada’s June 30 deadline for companies like Amazon, Google, Meta, Uber and Airbnb to pay their first instalments – including retroactive charges dating back to 2022 totalling up to $2.3 billion.
Trump’s furious statement
In a blistering post on Truth Social, Trump wrote: “We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country.
They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also. Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.
“We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period. Thank you for your attention to this matter!”
Canada refuses to budge
The dramatic breakdown comes after Canada’s Finance Minister François-Philippe Champagne firmly rejected mounting pressure to pause the tax during trade negotiations.
“The [digital services tax] is in force and it’s going to be applied,” Champagne told reporters just last week, despite warnings from business groups on both sides of the border.
The tax, which was passed by Canada’s Parliament and received royal assent on June 20, 2024, targets large multinational companies with:
- Global revenues of €750 million or more
- At least $20 million in Canadian digital services revenue
Billions at stake
According to the Computer & Communications Industry Association (CCIA), affected companies – predominantly leading U.S. technology firms – face payments of up to $3 billion, including retroactive charges.
The tax applies to revenue from:
- Online advertising
- Online marketplaces
- Social media platforms
- Sale and licensing of user data
A June letter signed by 21 members of Congress warned that U.S. companies would pay 90% of the revenue Canada collects from the tax.
First payments due Monday
With the first payments due June 30, American tech giants face an immediate bill:
- Retroactive charges dating back to January 1, 2022
- Annual 3% levy on Canadian digital services revenue
- Requirements to file annual tax returns by June 30 each year
Canada Revenue Agency representatives indicated they would start issuing forms and compliance guidance soon – though Trump’s announcement throws the entire process into chaos.
‘Revenge tax’ threat looms
The breakdown in talks comes amid a broader trade war that has raged for months between the two North American neighbours.
Earlier this week, U.S. Treasury Secretary Scott Bessent had appeared to make progress by announcing a deal to scrap Trump’s proposed “revenge tax” – a controversial withholding tax that could have cost Canadians and Canadian businesses billions.
That tax, known as Section 899, was projected to rake in $116.3 billion over the next decade but faced criticism that it would eventually hurt the U.S. economy by driving away foreign investment.
Trade war escalates
The digital services tax dispute adds another front to an already tense trade relationship:
- Trump raised tariffs on Canadian steel and aluminum to 50% in early June
- Canada has threatened retaliatory tariffs but held off while negotiations continued
- Prime Minister Mark Carney and Trump had set a mid-July deadline for a comprehensive trade deal
- The 3½-month trade war began in March with protectionist U.S. tariffs
Dairy dispute resurfaces
Trump’s statement specifically highlighted Canada’s dairy tariffs – some reaching as high as 400% – as evidence of Canada being “a very difficult Country to TRADE with.
The dairy dispute has been a long-standing irritant in U.S.-Canada trade relations, with American farmers complaining about restricted access to Canadian markets under the country’s supply management system.
Following Europe’s lead
Trump accused Canada of “obviously copying the European Union” with the digital services tax.
Similar taxes in France, Italy, Spain, Turkey, and the United Kingdom have already drawn U.S. opposition, with the Office of the U.S. Trade Representative filing formal objections.
The taxes are seen as targeting American tech companies while protecting domestic firms in similar businesses.
What happens next?
With Trump promising to announce new tariffs within seven days, Canadian businesses and consumers brace for potential economic pain.
The termination of all trade discussions means:
- No pathway to resolve the broader trade war
- Uncertainty for businesses on both sides of the border
- Potential escalation of retaliatory measures
- Risk to the integrated North American economy
Tech giants caught in crossfire
For companies like Amazon, Google, Meta, Uber and Airbnb, the situation creates an immediate dilemma:
- Monday’s payment deadline still stands under Canadian law
- New U.S. tariffs could affect their Canadian operations
- Uncertainty over whether payments will ultimately be required
- Risk of being caught between two governments’ demands
Economic fallout feared
Trade experts warn that escalating the dispute could damage both economies.
“Nobody wins a trade war and nobody wins a tax war,” one analyst noted, warning that the integrated nature of the U.S.-Canada economic relationship means both countries will suffer.
The abrupt end to negotiations leaves businesses scrambling to prepare for whatever tariffs Trump announces next week – and bracing for Canada’s likely retaliation.
For now, the clock ticks toward Monday’s deadline as billions hang in the balance and two longtime allies hurtle toward their most serious trade confrontation in decades.
