The US President announced Donald Trump On Friday, an immediate comment of all commercial negotiations between the United States and Canada, this decision came in response to the Canada application for the DST digital service tax by 3% on major American technology companies.
The US administration described the tax as a “scandalous attack”, and declared its intention to impose Customs New within 7 days, which re -ignited a commercial crisis that may overthrow economic stability between the two allies, according to the Associated Press.
American Resolution: An immediate comment and a direct threat
The US President said, in a post on the “Truth Social” platform, which was reported by Reuters, that the decision came: “Based on this scandalous tax, we announce the end of all commercial negotiations with Canada.
Trump described Canada as “a country that is difficult to deal with commercially”, accusing Ottawa of imitating European tax policies carrying American technology companies unjustified burdens, and claimed, according to Fox Business, that Canada imposes fees of 400% on American dairy products.
Official investigation and reprisal fees
The US Treasury Secretary confirmed Scott BessentIn comments reported by Reuters, that the US Trade Representative Office will be launched under Article 301 of the Trade Law, in preparation for imposing reprisal fees worth two billion US dollars annually on Canadian exports.
Besent added that the US administration is working to accelerate negotiations with other partners such as China, India, the European Union and Japan, noting that “the new agreements can be reached by the Labor Day.”
Canada responds: Do not retract tax sovereignty
On the other hand, the Canadian Prime Minister replied Mark CarneyWho took over the government in March 2025 to succeed Justin Trudeau, with statements reported by Reuters, saying: “We will continue to engage in complex negotiations … to serve the interests of Canadian workers and companies, but not under threat or coercion.”
For his part, Canadian Finance Minister Francois Philip Champin said, in an interview with CTV News on June 19: “We have all the winning papers. We will not hang the tax under pressure.”
Bloomberg also reported that Ottawa began legal consultations to study asylum in the mechanisms of dispute within the North American Free Trade Agreement (USMCA), or to file the case to World Trade Organization If the United States carries out its threats.
In this context, Professor Frank Jiang, a professor of international trade at the University of Carlton, said in a special statement to Al -Jazeera Net: “From the perspective of international commercial law, Canada has the full right to impose sovereign taxes on digital profits that are achieved within its borders. The issue is not related to America, but to adapt tax policies with the reality of the digital economy.”
Digital Tax: A retroactive effect and a high cost
According to Reuters, the Digital Services Tax Law approved by the Canadian Parliament in June 2024 entered the implementation on the 28th of the same month, and is retrospectively applied starting from January 1, 2022.
The tax is 3% on revenues resulting from digital services targeting Canadian users, if the company’s global revenues exceed 750 million euros (about 879 million dollars) and local revenues are 20 million Canadian dollars (about 14.6 million dollars).
The Canadian government expected, according to official financial documents, which was reported by Bloomberg, to achieve the tax:
- 7.2 billion Canadian dollars between 2023 and 2027 (equivalent to about 5 billion US dollars).
- 500 million US dollars annually from American companies such as Amazon, Meta, Alphabet, and Ub.
- Two billion US dollars retroactively due to June 30, 2025.
Reuters indicated that technology companies have already started passing this cost to the Canadian consumer, where Google and Amazon raised their fees by 2.5% to 3% on advertisements and services directed to the Canadian market.
In his analysis of this step, Professor Jiang said: “It is true that the tax may be translated into higher prices for consumers, but the wider gain of Canada is to impose a balance between the economic power of global technology companies and the rights of states to organize its markets. It is a more initial battle than financial.”
Financial markets ignore the escalation
Despite the escalating political tensions between Washington and Ottawa, and the American waving to impose reprisals of up to two billion US dollars annually, in addition to an official comment of trade negotiations between the two countries, the American financial markets have shown remarkable flexibility in dealing with these developments, which may indicate the confidence of temporary investors that the escalation will not go out of the political framework.
The New York Post quoted that the American markets were closed on notice gains:
- The Standard & Poor’s 500 index increased by 0.5% to 6,173.07 points.
- The Nasdaq index increased by 0.5% to 20,273.46 points.
- The Dow Jones Index added more than 400 points, equivalent to about 1%.
The Market Watch platform attributed these gains to the strong performance of artificial intelligence shares, and investors’ expectations for a expected reduction in the interest by the Federal Reserve.
But analysts have warned that any additional escalation with Canada may confuse supply chains and negatively affect consumption.
Political and commercial escalation
On February 1, 2025, the Trump administration imposed customs duties by 25% on most Canadian goods, in addition to 10% on energy exports, justifying the step with fears of border security and narcotic substances coming from Canada.
Ottawa immediately received a fee on US commodities worth 30 billion Canadian dollars (about 21.88 billion dollars), and then expanded it to $ 155 billion Canadian dollars (about 113.05 billion dollars) within 21 days, according to Reuters.
This coincided with a wave of popular anger in Canada, as it launched boycott campaigns against American products, and opinion polls published in the Canadian CBC showed that between 65% and 90% of Canadians stopped buying American products or traveling to the United States.
In the midst of the escalation, Trump sparked great controversy with repeated statements about the possibility of annexing Canada as US State No. 51.
Former Canadian Prime Minister Justin Trudeau responds to it, in a statement carried by the English island, saying: “There is no single opportunity in hell to become Canada part of the United States.”
The results of an opinion poll conducted by Angos Reed showed that 82% of the Canadians completely rejected this idea, while only 13% supported it with conditions.
As for the American Ambassador to Canada, the House of Harkra, he told the Washington Post: “I spend most of my time calming fears, not in negotiation … The statements precede diplomacy unfortunately.”
Failure
As the tensions continued, the summit came Seven Group To constitute a new opportunity for dialogue, but it turned into a new disappointment.
At the summit hosted by Canada in Alberta between 11 and 16 of this month, Trump and Carney agreed – according to Reuters – on a “30 -day negotiating framework” to try to reach a balanced commercial solution.
But Trump withdrew from the summit early due to an escalation in the Middle East between Iran and Israel, and no concrete results were achieved, following the decision to suspend the talks in full.
Open scenarios and complex tensions
The researcher in the international economy at the University of Ottawa Ahmed Ismail, in an interview with Al -Jazeera Net, believes that the relationship between Canada and the United States is entering a sensitive and complex phase, as the commercial dispute has exceeded the issue of digital tax and has become a real test of the limits of economic sovereignty, and the extent of the ability of international commercial law to contain tensions between the allies.
Ismail said: “In the coming days, Ottawa and Washington will find themselves at a crossroads. Fawashdon, as expected, will be announced within a week for an expanded list of customs duties that may include dairy products, wood, cars, and digital services, and this will open the door to a sharp economic escalation.”
He added that Canada does not intend to decline under pressure, noting that the Canadian government, according to official statements reported by Bloomberg, “the digital tax is part of its economic sovereignty and does not see a legal justification for its abolition.” He also stressed that Ottawa is seriously considering the option to file an official commercial lawsuit under the USCA agreement, or to resort to the World Trade Organization, a legal path that may extend for long months and the relationship is held more.
With regard to the markets, Ismail explained that investors are awaiting the impact of the crisis on indicators InflationEspecially with the high index of basic personal consumption expenses “BCE” to 2.7%, according to Market Watch, noting that “any additional escalation may confuse supply chains and strike consumer confidence, which reflects negatively on the behavior of spending in vital sectors.”
He warned that the repercussions of this conflict may not be limited to North America, but may extend to global markets by hitting cross -border supply networks, especially in the fields of energy, rare minerals, and digital services.
Ismail concluded by saying: “We are facing a detailed moment. If tension is not contained quickly, the confrontation may turn into a structural crisis, breaking the trade and political balance that lasted for decades between Canada and the United States.”