The Canada-US trade relationship is facing its biggest crisis in years after Canada imposed a retroactive 3% digital services tax on US tech giants, creating a $2 billion liability. President Trump called it a “direct attack,” ended trade talks, and threatened tariffs within a week. Prime Minister Mark Carney defended Canada’s sovereignty, balancing economic risks with public frustration over big tech tax avoidance. The dispute highlights deeper tensions about fair taxation in the digital age, sovereignty, and power imbalances between the nations.

While Canada seeks to tax tech giants fairly, the US sees the tax as discriminatory. Trump’s threat of tariffs risks disrupting supply chains, energy trade, and agriculture ties, impacting both economies. The conflict also signals potential ripple effects globally, as other countries consider similar taxes on tech companies.

The outcome will set precedents for digital taxation and test whether Canada-US trade frameworks can handle new economic realities. Millions depend on the relationship’s stability—its future hinges on whether leaders find compromise or escalate further.