Predictable: Trump Ends Trade Talks Over Digital Services Tax

After years of back and forth, the Digital Services Tax has finally bitten Canada in the rear as Trump ends trade talks.

It’s been a long-standing and winding debate where it seemed that Canada was living on borrowed time, but that time has finally run out and the Digital Services Tax finally blew up in the Canadian government’s face. I won’t go over all of the moving parts of this aspect of digital policy, but I’ll go over the relevant parts here.

Canada’s Digital Services Tax has been something long pushed by the mainstream media. They absolutely love this policy for the simple reason is that it hurts successful online services. It’s tied quite closely to their push to “reign in Big Tech”, so whenever they end up covering this, it very often is to help advertise this as this great and wonderful thing that was “long overdue”. This while trying to ignore or minimize the criticism wherever possible. In short, they openly lobbied for this right in their own news reports (not new since they did this open lobbying for the Online News Act and Online Streaming Act).

The Digital Services Tax is problematic for a whole variety of reasons, but one of those problems is that it is a violation of the USMCA/CUSMA. This is for the simple reason that it targets American companies. The Canadian government has long tried to push the narrative that it’s more about trying to “reign in Big Tech” and that “Big Tech” doesn’t pay taxes and this is about trying to “correct” this situation so that Canadian businesses can compete against these foreign “Big Tech” platforms. If Canadian businesses pay taxes, so should the foreign “Big Tech” platforms. The problem with that is that “Big Tech”, in order to operate in Canada, already has to pay taxes in the first place, so the argument is misleading. Still, the talking point pushed by the government (echoed by the mainstream media) in the past is important here.

Now, here we are today with the US president saying on social media that he is now ending all trade talks with Canada over the Digital Services Tax. This left Canada’s mainstream media scrambling to try and find talking points over why this move is so bad. The arguments I’ve been seeing are actually quite sporadic, but here are what I was able to find:

1. The announcement was completely abrupt and unexpected
2. The Digital Services Tax has been on the books for years, did Trump not know about this all this time?
3. There was no real warning that this was going to happen
4. The tax only happens to affect some American firms, but it’s across the board and affects Canadian firms as well
5. This is just Trump having a random temper tantrum and simply part of his erratic behaviour

Now, as much as I loathe Trump, all of the above talking points are little more than the mainstream media attempting to bullshit you with obvious lies hoping you haven’t been paying attention. So, let’s correct the record (again) and explain to you what really happened.

The Announcement Has Been a Long Time Coming

The battle with the Digital Services Tax spans through not only the Trump administration, but also the Biden administration. Both have long held grievances towards this, pointing out that this tax was designed to target American firms. Throughout the years, Canada has received numerous warnings from the US. While private communications can’t be so easily tracked, there have also been a number of public warnings from the Americans. There is the warning from July of 2022, the warning from December of 2022, the warning from January of 2023, a second warning in January of 2023, and an additional warning in November of 2023. Most, if not, all of these warnings were downplayed by mainstream media and the Canadian government because neither wanted to acknowledge that the Digital Services Tax was a trade irritant with the United States.

It wasn’t just warning that the American’s were issuing, either. It were also formal letters from bi-partisan groups of American lawmakers that were being sent around on top of it all. There was the letter issued in January of 2023 as well as a October of 2023. Like the warnings, the letters were ignored by the government and downplayed in the media.

In fact, as Canada faced an outright trade war, the Canadian government even delayed implementation of the Digital Services Tax back in November of 2023, knowing full well that this has long been upsetting the American’s. The idea behind the delay seemingly was to just let the American’s calm down before quietly implementing it in the first place. To the surprise of no one with any common sense, sneaking in a multi-billion dollar tax wasn’t going to go unnoticed. This tactic ultimately failed.

On top of all of that, the USTR itself said back in July of 2024 that they intend on using “all available tools” to fight the digital services tax.

As it started appearing as though the Digital Services Tax was going to get implemented, in June of 2024, the Canadian Chamber of Commerce sounded the alarm and begged the Canadian government to not implement the Digital Services Tax. The Retail Council of Canada echoed these comments, joining in to beg the government not to implement the Digital Services Tax. Those panicked messages, like everything else, were also ignored as Canada followed through and implemented the Digital Services Tax. The sentiment across the business community basically boiled down to “we’re fucked” when that shoe dropped.

It’s not surprising that this was the sentiment. In August of 2024, the US requested a trade dispute consultation in response to the Digital Services Tax. This was the first major step to issuing trade retaliation. In January of 2025, Trump issued an executive order, targeting Canada’s Digital Services Tax. In February of 2025, the US issued a memorandum to retaliate against the Digital Services Tax. Then, in April of 2025, the US formally listed the Digital Services Tax as a trade barrier.

Now, here we are today with the Canadian mainstream media throwing their hands up in the air at the announcement, shouting “trade retaliation over the Digital Services Tax? How unexpected! Who could’ve seen THAT one coming??? It’s SOOOOO unexpected that this happened! Totally out of the blue!” Give me a freaking break. It’s not my fault you chose to not pay attention here.

Trump Knew

While what Trump knows is a really short list, Trump knew about the Digital Services Tax. As mentioned above, Trump signed a freaking executive order targeting this specifically. He may have forgotten about it between then and now, but to try and say that he didn’t know about this until today is just not accurate.

The Warnings Were There and the Timing Isn’t Surprising

As shown in the first response, there were warnings for years. What’s more, as the mainstream media reports themselves admit, the Digital Services Tax was set to be implemented next week. Trump was already retaliating over the Digital Services Tax. The fact that it was being implemented was always going to be a legal trigger for challenges in the first place.

The Digital Services Tax Was Created to Explicitly Target American Firms

The whole reason the Canadian government even created a Digital Services Tax was to implement a policy generally described as “get money from Big Tech” (Michael Geist’s definition, not mine, though highly accurate). The Canadian government felt that American firms were somehow “ripping Canada off” and the system had an “unfair advantage” for “Big Tech”. Part of their whole approach to “level the playing field” (they used THAT line to death), they slapped this massive tax on “Big Tech” because it was time for them to “pay their fair share”. Simply put, the whole damned point of the Digital Services Tax was to target American firms. It’s the end goal. What’s more, the Canadian government was going to be extremely belligerent about this issue on top of it all, staring down American threats that extend beyond the Trump administration and well into the Biden administration.

Now, with the Digital Services Tax finally biting Canada in the ass, the jackwagons in the mainstream media are trying to engage in revisionist history and argue that this is just an across the board tax that totally affects Canadian firms too. In no way could it be construed as something that targets American firms specifically! We swear! Yeah, give me a break. No one in their right mind who is aware of the history of the Digital Services Tax believes that.

The Retaliation Was Not Only a Long Time Coming, But More Could Be on the Way

While there is no disputing that Trump is erratic and just does things on a whim without any logical rhyme or reason, it is actually a bit of a surprise that the US hasn’t responded more forcefully on this issue earlier. It was cited as a reason for earlier trade retaliation, but the fact that it wasn’t more forcefully acted on is unusually patient on Trump’s part. That patience seems to have run out, however, and Canada is finding out that it was on borrowed time all this time.

The thing that I haven’t seen talked about in the mainstream media is that this is one of three legislative actions that has been a trade issue with the American’s. Embedded with the Digital Services Tax for the trade grievances from the US were also the Online Streaming Act and the Online News Act. Both of those laws were also cited time and time again as trade issues because, like the Digital Services Tax, the Online News Act and Online Streaming Act also target American firms.

With the Online News Act specifically, there are only two firms that the law targets: Meta (Facebook and Instagram) and Alphabet (Google). Guess what? Both are American firms. There is literally no other firm that this law targets. There is the possibility that retaliation isn’t coming because Google offered a heavily discounted deal and Meta dropped news links from their platform to comply with the law, but that isn’t certain. There were rumbling to greatly reinterpret the law to try and charge Meta, but there is the possibility that this could also rope the US into the picture and create additional trade tensions. There’s a sort of uneasy truce for now, but the boat could rock quite easily at any point.

Then there is the Online Streaming Act. That law also targets American firms such as YouTube, Amazon Prime, Apple TV, Netflix, and others. The demand, of course, being that they must fork over money because they are successful and mainstream media is not, therefore, they have to pay a sort of “innovation tax” to prop up the legacy media who has shown little interest in creating content Canadian’s want to watch. Again, the US has long argued that this represents a trade barrier, but Canada implemented it anyway. Currently, it is working its way through the CRTC consultation process and risks numerous legal and trade challenges.

So, not only is the Digital Services Tax the reason for Trump to issue trade retaliation, it might not even be the only one. For as much as I despise Trump and everything he represents, he has an exceedingly rare point that all three laws are trade violations that are subject to American trade retaliation.

What Next?

Now, there is some speculation that since the US is violating the USMCA/CUSMA with things like steel and aluminum, there is room for negotiation. In exchange of lifting the Digital Services Tax, the US could lift some of its illegal tariffs on Canada. That would actually be a net positive for Canadians since platforms like Google have already announced that the Digital Services Tax would be passed onto consumers (again, not a surprise as that is general longstanding policy of platforms in general). This was threatening to worsen the affordability crisis in Canada and the idea that this would get removed is only good news for your average Canadian consumer. I see that being entirely possible at least. Still, trade talked need to restart before that happens and, as Trump announced, those trade talks were cut off.

What’s also possible is that Trump could also demand that the Digital Services Tax get removed as a condition to continue trade talks. It’s hard to say if Canada would go along with it since the Canadian government was so religiously tied to maintaining this Digital Services Tax, so it’ll remain to be seen of that possibility could play out.

This showdown between Canada and the US over the Digital Services Tax was a long time coming. Canada was living on borrowed time as it was amazing that the US wasn’t more forceful on this issue. Now that Canada’s stupidity on this matter finally bit Canada in the rear, ignoring and downplaying this issue is no longer an option. It’s now front and centre whether the mainstream media and the government likes it or not. Who knew that this whole situation was yet another “Drew Wilson was right” moment?

Drew Wilson on Mastodon, Twitter and Facebook.