Tensions between the U.S. and Canada flared again after former President Donald Trump harshly criticized Canada’s newly introduced 3% digital services tax. The tax, aimed at major tech firms like Amazon, Google, and Meta, was set to be applied retroactively from 2022 and could cost U.S. companies up to $2 billion by the end of the month.

Trump took to Truth Social on June 27, calling the move a “blatant attack” on American businesses. He accused Canada of being an unreliable trade partner and swiftly suspended all ongoing trade discussions between the two countries. His statements carried weight as they were accompanied by threats of new tariffs.

Canadian Prime Minister Mark Carney responded in a measured tone, stating that his government would continue negotiations in a way that prioritizes the interests of Canadian citizens. His calm demeanor stood in contrast to Trump’s aggressive rhetoric.

Trump, however, remained firm. He asserted that the United States has significant economic leverage over Canada and predicted that Ottawa would eventually retract the tax. He emphasized that only the U.S. government should have the right to tax American companies, not foreign nations.

The controversy caught the attention of U.S. lawmakers, who joined Trump in condemning the tax. They labeled it “unprecedented and retroactive,” warning that it could damage the global digital economy and unfairly target U.S. innovation and success.

Trump also extended his criticism beyond Canada, accusing European nations of similar unfair digital tax practices. He argued that these countries benefit from U.S.-based tech companies and have no right to impose additional taxation on them.

After a tense phone call between Trump and Prime Minister Carney, Canada announced a pause on implementing the digital services tax. The decision came just before the tax payments were due, suggesting the conversation may have influenced the outcome.

Carney later confirmed that this pause was strategic, allowing for further discussions in advance of the upcoming G7 deadline in July 2025. The move helped resume trade talks and temporarily cooled down a rapidly escalating international dispute.