Carney’s Digital Tax Debacle: How Ottawa Triggered a Trade Fallout with Washington

Trump walked away from trade talks over Canada’s retroactive digital services tax—enacted by Mark Carney’s Liberal government despite clear warnings from experts, businesses, and industry leaders.

Donald Trump has officially walked away from the negotiating table. The trigger? Canada’s ill-conceived Digital Services Tax (DST)—a reckless, retroactive grab for revenue targeting U.S. tech firms. Trump isn’t mincing words: he’s calling it a “blatant, discriminatory attack” on American innovation, and now he’s moving to punish Canada economically for it.

So what exactly is this tax?

The Digital Services Tax, passed by the Liberal government and implemented under Mark Carney’s leadership, applies a 3% levy on revenue—not profits—earned by large digital firms operating in Canada. And it’s retroactive. That means it’s being applied to earnings from as far back as January 1, 2022, with companies forced to make lump-sum payments by June 30, 2025.

This tax specifically targets companies with global revenue of at least 750 million and Canadian digital revenue of at least CAD 20 million. Translation: It’s a direct hit on American giants like Google, Amazon, Meta, Airbnb, and Uber, and it spares Canadian firms and EU-based entities from equivalent exposure. It's not tax fairness—it’s protectionism with a smiley-face sticker.

Trump has responded in kind. As of June 27, all trade negotiations with Canada are suspended. Retaliatory tariffs—already mounting since February—are set to escalate. Trump is drawing a red line, and he’s daring Canada to cross it.

What's at stake?

Everything. Canada sends over 75% of its exports to the United States. We’re talking about nearly a trillion dollars in annual trade. With Trump now actively leveraging tariffs and ending negotiations, entire sectors—from automotive to agriculture, energy to manufacturing—are in the crosshairs.

Already this year, Trump has slapped 25% tariffs on Canadian imports, with specific hits to steel, aluminum, vehicles, and auto parts, and 10% tariffs on Canadian oil, gas, and potash. These moves have already disrupted markets. Ending trade negotiations is a body blow to an already wobbly Canadian economy—still reeling from Trudeau-era mismanagement and Carney’s corporate globalist agenda.

So who could have seen this coming?

Almost everyone.

In testimony before the House of Commons Standing Committee on International Trade on June 11, 2024, Dr. Meredith Lilly, Associate Professor and Simon Reisman Chair in International Economic Policy at Carleton University, issued a precise and deeply informed warning about Canada’s Digital Services Tax (DST).

Dr. Lilly, a leading authority on North American trade, emphasized that unilateral implementation of a DST would “discriminate against large U.S. firms” and could trigger U.S. retaliation under the Canada-United States-Mexico Agreement (CUSMA). Her words were clear:

“Unilateral action by Canada to introduce a digital services tax would discriminate against large U.S. firms. We should be prepared for U.S. retaliation if these measures are enacted, and Canadian lawmakers should be aware of the damaging consequences for the broader CUSMA review process.”

She explained that such policy moves could provoke formal dispute resolution under CUSMA Chapter 31 and complicate the 2026 review of the trade agreement. Dr. Lilly stated unequivocally:

“Both of these things [the Online Streaming Act and the DST] will complicate the process and result in a full review if they aren’t addressed before then.”

This wasn’t a political shot—it was an expert diagnosis. Dr. Lilly’s analysis made it crystal clear: if Canada chose to proceed with a retroactive, discriminatory tax on U.S. digital firms, the blowback from Washington wouldn’t wait until 2026. It would come sooner. And it did—on June 27, 2025, President Trump pulled the plug on all trade talks with Canada, citing the DST as a direct affront to American companies and fair trade principles.

In a June 2024 committee hearing, MP Kyle Seeback pressed experts on the fallout of Trudeau-era policies like the Digital Services Tax, asking bluntly:

“If these all go through and are implemented, as it looks like the current government wants to do, will it make the CUSMA review easier or more complicated?”

Dr. Meredith Lilly didn’t mince words:

“If the online streaming act and the digital services tax move forward, I fully expect action to happen before the 2026 review. I think the Americans will respond.”

So Kyle Seeback saw it. Meredith Lilly warned about it. But this wasn’t just a red flag waved by a few policy experts or MPs in a backroom committee. No—Canada’s entire business community was screaming from the rooftops about the catastrophic implications of the Digital Services Tax.

Let’s be clear: this wasn’t some quiet objection buried in legalese. It was a full-blown economic revolt.

The Canadian Chamber of Commerce called it out as early as September 2023, warning that the tax would raise prices on digital services, hammer consumers, and almost certainly provoke retaliatory tariffs from the United States—a country that, I might remind you, accounted for $960.9 billion in bilateral trade in 2022 alone.

The Retail Council of Canada joined the fight in June 2025, warning that retailers and everyday Canadians would be caught in the crossfire of U.S. retaliation. The Business Council of Canada didn't mince words either, saying the tax carried “serious economic consequences” and “a high risk of sparking a trade dispute”—exactly what happened when Donald Trump walked away from trade negotiations.

And it didn’t stop there.

The Canadian Bankers Association, Canadian Life and Health Insurance Association, Canadian Venture Capital Association, and Future Borders Coalition all signed a joint letter in June 2025 pleading with Mark Carney’s government to hit pause. They warned of massive financial disruptions, threats to investment stability, and damage to border operations.

This wasn’t lobbying. It was a desperate attempt to prevent economic self-harm.

Even the groups who typically tread lightly around Ottawa saw the writing on the wall. They were begging for sanity. And what did the Liberal government do? They shoved the tax through anyway—retroactive to 2022—and waited for the backlash.

Well, it came. Trump walked. Tariffs hit. Negotiations died. And Canada’s business leaders, from Bay Street to the border crossings, are now left to deal with the fallout they predicted—and Trudeau’s team ignored.

You were told the Liberals were the “adults in the room.” That they could navigate Trump. That they understood diplomacy, trade, and economics. But let’s be honest—an eight-year-old could have seen this coming. You slap a retroactive tax on American companies, and you expect no consequences? That’s not strategy. That’s stupidity.

This entire debacle is proof that the Liberal Party is utterly incapable of negotiating with strength. They don't understand leverage, they don't understand power, and they clearly don’t understand how to protect Canada’s economic interests. Mark Carney, Trudeau’s handpicked heir, isn’t some master tactician—he’s a globalist relic from 2008, still clinging to failed ideas and the fantasy of technocratic rule.

Unfortunately for him—and for us—this isn’t 2008 anymore. The world has changed. Trump is back, the rules are different, and while other countries pivot, adapt, and push back, Canada’s Liberal government is stuck in the past. Rigid, arrogant, and dangerously out of touch.

What we’re witnessing isn’t just a policy failure. It’s the collapse of a worldview—the end of the Liberal fantasy that globalist tax schemes, virtue signaling, and bureaucratic arrogance can substitute for real leadership. And it's playing out in real time: with lost jobs, broken trade relationships, and Canada's economic credibility circling the drain.

But here’s the good news: Canadians are waking up.

The Liberal government, now clinging to a minority held together by duct tape and desperation, won’t be around for long. The legacy media can’t protect them forever. The echo chamber of downtown Toronto can’t drown out the truth spilling out from small towns, border communities, and every corner of the real Canada.

This is a patriotic call to action. The sooner an election is called, the better. Because Canada cannot afford more of this. We cannot afford a government that punishes productivity, antagonizes our closest ally, and drives our economy into a wall—all while patting itself on the back for “moral leadership.”

It’s time to turn the page. Time to elect leaders who understand strength, who prioritize prosperity, and who don’t bend the knee to unelected bureaucrats in Brussels or Davos. Canada needs a government that fights for our interests—not the interests of Silicon Valley tax envy or UN think tanks.

The collapse has begun. Now it’s up to Canadians to finish the job—and rebuild this country with pride, purpose, and power.