Just when it seemed like the dust had settled, a new war of words has exploded between two of the world’s closest allies.

Tensions are boiling over again as President Donald Trump lashes out, accusing Canada of a “blatant attack.”

Didn’t take it lightly
Both known for their blunt, no-nonsense styles, Canadian Prime Minister Mark Carney, 60, and U.S. President Donald Trump, 79, seemed to share a degree of mutual respect — at least until recently.

Trump was reportedly impressed by Carney’s former career as a top banker. But that diplomatic calm may now be unraveling — and fast.

The trigger? A controversial new tax that’s put a major dent in U.S.-Canada relations. Canada has announced a 3% digital services tax on large tech firms like Amazon, Meta, Google, Uber, and Airbnb — and it’s retroactive to 2022.

As NBC News reports, that means American tech giants could be facing a whopping $2 billion tax bill, due by the end of this month. The tax applies if the company earns more than $14.6 million from Canadian users in a calendar year.

Unsurprisingly, Trump didn’t take it lightly.

In a fiery post on Truth Social on June 27, he wrote:

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

They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also. Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.
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. Thank you for your attention to this matter!”

A major shift
Trump’s comments marked a major shift, signaling a potential trade freeze with one of America’s largest economic partners. Last year alone, U.S.-Canada trade topped $762 billion, according to the U.S. Trade Representative.

When asked about Trump’s harsh response, Carney didn’t flinch, simply stating:

“We’ll continue to conduct these complex negotiations in the best interests of Canadians.”

Trump later doubled down in comments to reporters at the White House, warning:

“Economically we have such power over Canada. We’d rather not use it. It’s not going to work out well for Canada. They were foolish to do it.”

Asked if there was a way to restart talks, he said:

“It doesn’t matter to me,” adding that Canada could “remove the tax,” and predicting it would eventually do so.

The escalation follows pressure from several U.S. lawmakers, who recently called on Trump to act quickly in response to what they called an “unprecedented, retroactive tax.”

“Allowing Canada to proceed with this unprecedented, retroactive tax on U.S. firms would send a signal to the rest of the world that they have the green light to proceed with similar discriminatory cash grabs targeting our firms, workers, and tax base,” lawmakers warned.

Backed down
Trump also used the moment to lash out at Europe, which has pursued similar digital tax policies.

“They have been unbelievably bad to us. If you look at past presidents, they’ve treated them very badly,” Trump said.

“They’re being very nice to me, because I get it. I know the system, and we have the cards. We have the cards far more than they do, and they have not treated us well, and they’re coming to us right now.”

He added:

“They’re nasty people, and I don’t want them affecting U.S. companies. I don’t want that — if anybody’s going to affect a U.S. company, I want it to be us, and if they’re going to have to pay a penalty or fine, let it be to us.”

When it comes to the tax dispute between Canada and the U.S., it looks like Trump may have won this round.

A whirlwind of events unfolded after Trump’s Friday post, ultimately leading to a high-stakes phone call between Trump and Carney on Sunday night.

The same evening, Ottawa announced it was walking back its controversial digital services tax “in anticipation” of a mutually beneficial trade agreement with the United States — just one day before the first tax payments were due.

“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,” Canadian Prime Minister Mark Carney said in the statement.