Canada’s PM Carney Backs Down on Tech Tax After Trump Outrage: A Shocking Reversal with Global Ripples

In an unexpected political reversal that sent shockwaves through Ottawa and reverberated across global markets, Canadian Prime Minister Mark Carney announced late Monday that his government will suspend the controversial Digital Services Tax (DST), just hours before it was set to come into effect.

The U-turn comes after a blistering statement from former and likely future U.S. President Donald Trump, who accused Canada of launching a “blatant attack” on American technology companies.

“This is nothing more than a shakedown of our great American businesses,” Trump wrote in a viral Truth Social post early Sunday morning. “Mark Carney and the Canadian Liberal Party are trying to steal from American companies with this terrible, terrible tax. It’s a direct assault on the U.S. economy, and it won’t stand.”

Background: The Digital Showdown

The DST was originally introduced in 2021 by then-Finance Minister Chrystia Freeland but delayed repeatedly amid negotiations at the OECD level. Designed to tax revenues generated by foreign digital companies operating in Canada, the 3% tax aimed to target firms like Amazon, Meta, Google, and Uber, which collectively earn billions in advertising and platform revenues from Canadian consumers while paying relatively little in domestic taxes.

By the time Carney took office in 2024, the policy had gained political traction, especially among urban voters concerned about tech monopolies and lost revenue. Despite international warnings, Carney’s administration signaled it would proceed with the DST by July 1, 2025.

Trump Strikes Back

That announcement did not go unnoticed. With Trump leading polls for the 2026 U.S. presidential election and continuing to shape Republican foreign policy, his influence remains immense. In a series of statements over the weekend, Trump threatened retaliatory tariffs on Canadian aluminum, dairy, and automotive exports—a tactic he previously employed in 2018 during NAFTA renegotiations.

“We will slap massive tariffs on Canadian goods if they proceed with this disgraceful tax,” Trump said. “Nobody taxes American innovation. Nobody.”

Just hours later, Carney’s office issued a surprise late-night statement announcing that implementation of the DST would be “paused pending further consultation with international partners.”

Domestic Fallout

The move has sparked intense political backlash at home. NDP leader Jagmeet Singh called the decision “a capitulation to Trump’s bullying” and demanded an emergency parliamentary session. “This tax was about fairness. American tech giants profit off Canadians every day without paying their fair share. Backing down shows weakness,” Singh said.

Even within Carney’s own Liberal Party, discontent is growing. One senior Liberal MP, speaking on condition of anonymity, told CBC, “We look spineless. The prime minister folded faster than anyone expected.”

Tech industry lobbyists, however, applauded the decision. The U.S.-based Digital Economy Coalition issued a statement praising Carney for “prioritizing cooperation over confrontation.” Google Canada called the pause “a wise move in uncertain times.”

Carney’s Rationale

In a Tuesday morning press conference, Carney defended the decision as pragmatic.

“Canada remains committed to a fair and modern digital tax regime,” he said. “However, unilateral implementation at this moment could jeopardize our economic recovery and broader trade relations. We are giving diplomacy one more chance.”

Carney pointed to ongoing negotiations at the OECD, where over 140 countries are working to implement a global framework for taxing multinational digital firms. “We remain hopeful that a coordinated solution will emerge before year-end,” he added.

Analysts note Carney’s tone contrasts sharply with his earlier stance during the 2024 election campaign, when he called Big Tech “an unregulated empire that must be held accountable.”

Economic and Geopolitical Stakes

With over 80% of Canada’s exports headed to the United States, economic retaliation from Washington—even from an unofficial presidential candidate—can have devastating consequences. Markets reacted immediately: the Canadian dollar dipped 1.2% overnight, while shares of Canadian auto parts firms slumped in early trading.

Trade lawyer Laura Dawson told CTV, “The tax may have been justified on economic grounds, but the political timing was disastrous. Picking a fight with a Trump-led GOP is not a winning strategy for Canada.”

Meanwhile, experts say Trump’s aggressive response is part of a broader attempt to reassert American dominance in trade policy—especially with allies he believes have been “too cozy” with global governance institutions like the OECD and WTO.

What Happens Next?

Though the DST is suspended, it is not yet repealed. Finance officials confirmed it remains “legislatively intact” and could be revived if multilateral talks fail. However, Carney’s credibility is now in question—both with domestic voters and international counterparts.

“It’s not just about the tax,” said political analyst Chantal Hébert. “It’s about whether Carney can take a principled stand under pressure. Right now, the answer appears to be no.”

Trump, for his part, celebrated the reversal with characteristic flair. “Another W for Trump. Canada learned their lesson,” he posted Monday night, adding an image of a bald eagle clawing through a Canadian flag, which sparked outrage north of the border.

Conclusion: A Tense Calm

As July begins, what was expected to be a moment of economic sovereignty for Canada has turned into a test of political resolve. Prime Minister Carney’s gamble on diplomacy over confrontation may yet bear fruit—but for now, it looks more like retreat than strategy.

With the U.S. presidential election heating up and global tax reform efforts still stalling, Canada finds itself once again navigating between principle and pragmatism—caught in the gravitational pull of its powerful southern neighbor.