Just when we thought things had calmed down, a fresh verbal battle has erupted between two traditionally close allies. Relations are tense once more as President Donald Trump accuses Canada of a “blatant attack.”

Standing Firm

Known for their straightforward approach, Canadian Prime Minister Mark Carney, aged 60, and U.S. President Donald Trump, aged 79, seemed to have a mutual respect for each other — that is, until recent developments. Although Trump admired Carney’s impressive banking background, this diplomatic harmony appears to be crumbling.

The root of the issue? A new and controversial tax on digital services, significantly impacting U.S.-Canada relations. Canada revealed a 3% tax on large tech companies, including giants like Amazon, Meta, Google, Uber, and Airbnb, and made it retroactive to 2022.

According to NBC News, American tech firms face up to a $2 billion tax, with the bill due by the end of this month. The tax targets companies earning more than $14.6 million from Canadian users annually.

Needless to say, Trump was not pleased.

In a heated announcement on Truth Social on June 27, he expressed:

“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers up to 400% Tariffs, for years, on Dairy Products, has just announced that they are imposing a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country.

They are clearly mimicking the European Union, which has done the same, and is also under negotiation with us. Based on this unjust Tax, we are terminating ALL trade talks with Canada, effective immediately. We will notify Canada of the Tariff they will face for business with the USA within the coming week. Thank you for your attention to this matter!”

A Shift in Relations

Trump’s remarks indicate a significant shift, hinting at a potential trade halt with one of America’s biggest economic partners. In fact, last year’s U.S.-Canada trade reached a whopping $762 billion, as per the U.S. Trade Representative.

In response to Trump’s stern reaction, Carney stood firm:

“We’ll keep negotiating with Canadians’ best interests in mind.”

Later, Trump reiterated his stance to reporters at the White House, cautioning:

“We hold substantial economic power over Canada. We’d rather not use it. It’s not going to favor Canada. They made a misguided decision.”

When asked if talks could resume, he said:

“It’s irrelevant to me,” suggesting Canada could “revoke the tax,” predicting they would ultimately do so.

This escalation follows demands from U.S. lawmakers, urging Trump to act swiftly following what they called an “unprecedented, retroactive tax.”

“Allowing Canada to move forward with this unique, retroactive tax on U.S. firms would set a global precedent for similar discriminatory measures against our firms, workers, and tax base,” the lawmakers cautioned.

Backing Down

Trump further criticized Europe for similar digital tax plans.

“They’ve treated us extremely poorly. Past presidents saw similar treatment,” Trump explained.

“They’re acting courteously with me because I understand the dynamic. We hold the cards, and they’ve treated us unfairly, now they’re dealing with us.”

He added:

“They’re unpleasant and I don’t want them disrupting U.S. companies. If anyone’s affecting a U.S. company, I want it controlled by us, and if there’s a penalty or fine, it should be to us.”

Regarding the dispute over the digital tax, it seems Trump may have triumphed for now.

Following Trump’s heated post, events took a quick turn, culminating in a high-stakes discussion between Trump and Carney on Sunday night.

That same night, Ottawa revealed it was retracting its contentious digital services tax “in anticipation” of a beneficial trade agreement with the United States — this, just one day before the initial tax payments were expected.

“Today’s announcement supports the resumption of negotiations toward the July 21, 2025, timeline set during this month’s G7 Leaders’ Summit in Kananaskis,” stated Canadian Prime Minister Mark Carney.