Calling Canada's statement an interference in its domestic affairs and a violation of its sovereignty, Saudi Arabia said it has asked Horak to leave within 24 hours, recalled its own envoy and put on hold all new trade ties.
The Saudi Foreign Ministry also said it would freeze "all new business" between the kingdom and Canada.
Saudi's foreign ministry took such a step after Canada's foreign ministry urged Riyadh to release arrested civil rights activists.
The Saudi foreign ministry later tweeted: "The kingdom of Saudi Arabia. will not accept interference in its internal affairs or imposed diktats from any country". "Our government will never hesitate to promote these values and believes that this dialogue is critical to global diplomacy".
Jackie Hansen, a gender rights campaigner for Amnesty International Canada, said last Thursday that the circumstances of the arrests were still unclear and there was no news of any charges.
So far this year, Canada has exported C$1.4 billion ($1.1 billion) in merchandise goods to Saudi Arabia and imported C$2 billion in imports, leaving it with a cumulative year-to-date trade deficit with the kingdom of about C$640 million, according to Statistics Canada data.
Two-way merchandise trade between Canada and Saudi Arabia exceeded $4-billion past year, a significant portion of it from a controversial multibillion-dollar deal to sell combat vehicles equipped with machine guns and cannons to the Saudis. His wife and children are naturalised Canadian citizens.
The next day, the main Twitter account for Canada's Foreign Ministry said that "Canada is gravely concerned about additional arrests of civil society and women's rights activists in #SaudiArabia, including Samar Badawi" and called on Saudi authorities to "immediately release them".
A Saudi official confirmed reports that the Kingdom has agreed to admit an Iranian diplomat to head an office representing Iranian interests in Riyadh.
In April, Canadian Prime Minister Justin Trudeau expressed his "serious concern" over the continued jailing of Badawi to Saudi King Salman.
Crown Prince Mohammed bin Salman has been praised for pushing through reforms in recent months, which include lifting the ban on women driving in the kingdom.
Criticism of the deal angered the Saudis, who said publicly that the contract was meant to be a gift to cement friendship between the two countries and noted Riyadh could easily have awarded it to manufacturers elsewhere in the world.