Just when it seemed like the dust had settled, a new war of words has exploded between two of the worldโs closest allies.
Tensions are boiling over again as President Donald Trump lashes out, accusing Canada of a โblatant attack.โ
Didnโt take it lightly
Both known for their blunt, no-nonsense styles, Canadian Prime Minister Mark Carney, 60, and U.S. President Donald Trump, 79, seemed to share a degree of mutual respect โ at least until recently.
Trump was reportedly impressed by Carneyโs former career as a top banker. But that diplomatic calm may now be unraveling โ and fast.
The trigger? A controversial new tax thatโs put a major dent in U.S.-Canada relations. Canada has announced a 3% digital services tax on large tech firms like Amazon, Meta, Google, Uber, and Airbnb โ and itโs retroactive to 2022.
As NBC News reports, that means American tech giants could be facing a whopping $2 billion tax bill, due by the end of this month. The tax applies if the company earns more than $14.6 million from Canadian users in a calendar year.
Unsurprisingly, Trump didnโt take it lightly.
In a fiery post on Truth Social on June 27, he wrote:
โWe 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!โ
A major shift
Trumpโs comments marked a major shift, signaling a potential trade freeze with one of Americaโs largest economic partners. Last year alone, U.S.-Canada trade topped $762 billion, according to the U.S. Trade Representative.
When asked about Trumpโs harsh response, Carney didnโt flinch, simply stating:
โWeโll continue to conduct these complex negotiations in the best interests of Canadians.โ
Trump later doubled down in comments to reporters at the White House, warning:
โEconomically we have such power over Canada. Weโd rather not use it. Itโs not going to work out well for Canada. They were foolish to do it.โ
Asked if there was a way to restart talks, he said:
โIt doesnโt matter to me,โ adding that Canada could โremove the tax,โ and predicting it would eventually do so.
The escalation follows pressure from several U.S. lawmakers, who recently called on Trump to act quickly in response to what they called an โunprecedented, retroactive tax.โ
โAllowing Canada to proceed with this unprecedented, retroactive tax on U.S. firms would send a signal to the rest of the world that they have the green light to proceed with similar discriminatory cash grabs targeting our firms, workers, and tax base,โ lawmakers warned.
Backed down
Trump also used the moment to lash out at Europe, which has pursued similar digital tax policies.
โThey have been unbelievably bad to us. If you look at past presidents, theyโve treated them very badly,โ Trump said.
โTheyโre being very nice to me, because I get it. I know the system, and we have the cards. We have the cards far more than they do, and they have not treated us well, and theyโre coming to us right now.โ
He added:
โTheyโre nasty people, and I donโt want them affecting U.S. companies. I donโt want that โ if anybodyโs going to affect a U.S. company, I want it to be us, and if theyโre going to have to pay a penalty or fine, let it be to us.โ
When it comes to the tax dispute between Canada and the U.S., it looks like Trump may have won this round.
A whirlwind of events unfolded after Trumpโs Friday post, ultimately leading to a high-stakes phone call between Trump and Carney on Sunday night.
The same evening, Ottawa announced it was walking back its controversial digital services tax โin anticipationโ of a mutually beneficial trade agreement with the United States โ just one day before the first tax payments were due.
โTodayโs announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this monthโs G7 Leadersโ Summit in Kananaskis,โ Canadian Prime Minister Mark Carney said in the statement.
