Trump Targets Canada’s Digital Service Tax in New Trade Plan

U.S. President Donald Trump has unveiled a new trade policy, dubbed the ‘Fair and Reciprocal Plan,’ aimed at countering what he calls unfair international trade practices.

Part of the plan, announced today, February 13, takes specific aim at Canada’s Digital Service Tax (DST), which the U.S. claims unfairly targets American tech companies.

According to the White House, Canada and France each collect over $500 million annually from American firms through digital service taxes, with total global costs exceeding $2 billion per year. Trump argues that only the U.S. should have the right to tax its own companies and sees these levies as an unfair burden on American businesses.

The plan could lead to new reciprocal tariffs, which the U.S. hopes will pressure countries like Canada to drop or adjust their digital service tax policies.

While details of the trade measures are still in development, the announcement signals a potential shift in U.S.-Canada trade relations and a tougher stance on international taxation policies affecting American companies.

“Reciprocal tariffs will bring back fairness and prosperity to the distorted international trade system and stop Americans from being taken advantage of,” said the plan’s factsheet. So that could mean a similar digital tax on Canadian companies operating in the U.S. that offers services (possibly Ottawa-based Shopify, BlackBerry, Thomson Reuters and more).

Now, we knew a pushback from the U.S. was coming, after Ottawa enacted the retroactive Digital Tax on American tech giants last July.

The tax will be retroactively applied dating back to 2022 and targets revenue from companies providing digital services to Canadians or selling Canadian user data. So this targets big tech firms like Google, Amazon, Meta, Apple, and Microsoft (basically the ‘Magnificent 7’ that drives tech revenue). It also goes after digital marketplaces like eBay, Amazon and Airbnb. Netflix, TikTok and Spotify are also in the spotlight for any subscription fees or user engagement driven in Canada. Ottawa says these big companies need to pay their fair share.

We previously saw strong opposition from U.S. officials, including Trade Representative Katherine Tai, who warned of potential trade consequences. The U.S. Chamber of Commerce argues the tax violates the USMCA and WTO agreements, while Business Council of Canada President Goldy Hyder has urged Ottawa to reconsider to avoid damaging U.S.-Canada trade relations. The Americans also previously touted they would use “all tools” available to fight the 3% digital tax (sounds like we’re going around in circles here).

But former Finance Minister Chrystia Freeland defended the tax, saying it ensures digital companies pay their fair share, with projections estimating it will generate $2.3 billion CAD by March 2025 and nearly $6 billion over five years. The feds previously waited on a global tax agreement backed by the former Biden administration, but delays pushed Ottawa to proceed independently.

Business groups in Canada have also slammed the tax, warning it will increase prices for consumers and harm trade ties. Robin Guy of the Canadian Chamber of Commerce called on the federal government to reverse the decision, saying it “will not only make life more expensive for Canadians but significantly harm our relationship with the U.S.”

Besides the DST, the CRTC has a 5% tax on foreign streaming services such as Netflix, Apple and more–with U.S. equally not happy about that tax on its streaming giants.