Canada’s 3% digital tax sparks fury from Trump, halting trade talks and slapping tech giants hard

President Donald Trump has slammed the brakes on all trade negotiations with Canada in a fiery escalation over the country’s new digital services tax, which will retroactively slap Amazon, Google, Meta, Uber, and others with a staggering $2 billion bill.

Calling the tax “a direct and blatant attack on our country,” Trump announced late Friday that he was terminating all discussions on trade with Canada, effective immediately. The dramatic move sent shockwaves through both diplomatic and corporate circles, marking the latest twist in a second-term presidency increasingly defined by economic brinkmanship.

“It’s not going to work out well for Canada. They were foolish to do it,” Trump warned from the Oval Office.

The 3% levy, scheduled to take effect Monday, targets revenue earned from Canadian users by tech giants — regardless of whether those companies are based inside the country. Even more incendiary, the tax is retroactive, covering all applicable revenue since 2022, landing U.S. firms with a backdated bill due by the end of June.

Trump’s decision followed a Canadian announcement that it would stick with the tax, despite U.S. opposition. The president reacted with fury on his Truth Social platform, writing:

“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.”

In Ottawa, Prime Minister Mark Carney tried to strike a diplomatic tone but stood his ground, telling reporters, “We will continue to conduct these complex negotiations in the best interests of Canadians. It’s a negotiation.”

Still, Carney’s stance risks triggering a trade war with the U.S., just days after hosting Trump at the G7 summit in Alberta, where the leaders agreed on a 30-day deadline to finalise talks.

Industry groups wasted no time rallying behind Trump. “We appreciate the Administration’s decisive response to Canada’s discriminatory tax on U.S. digital exports,” said Matt Schruers, head of the Computer & Communications Industry Association.

Privately, executives at several tech firms expressed disbelief that the Trudeau-era tax — long delayed and expected to be watered down — was being enforced so aggressively under Carney. Insiders say companies are still calculating their liabilities, with some bills expected to hit hundreds of millions of dollars per firm.

Trump, never shy about brandishing economic leverage, boasted: “Economically, we have such power over Canada. We’d rather not use it.” He added that Canada might reverse the tax — “but it doesn’t matter to me.”

This standoff is only the latest chapter in Trump’s renewed battle against foreign governments perceived to be targeting U.S. firms. Canada had already been a favourite target in recent months, with Trump even joking that the country might “be better off as the 51st state.”

But this time, the consequences could be real and immediate. Trump is expected to unveil tariff details next week, with sources saying they could target Canadian auto exports, dairy, or energy sectors.

Meanwhile, economists warn that a retaliatory spiral could threaten billions in cross-border trade, shake investor confidence, and raise prices for consumers on both sides of the border.

“This is no longer just posturing. It’s a full-blown economic rupture,” said one trade analyst.

As the clock ticks toward the tax’s Monday rollout, tech giants, diplomats, and industry lobbyists are scrambling to contain the fallout. But Trump’s message is loud and clear: Cross the U.S. — pay the price.