United States President, Donald Trump, has abruptly ended trade discussions with Canada, citing a controversial tax targeting large tech firms as the reason for the breakdown.
The announcement, made via social media, signals a new phase of tension between the two North American neighbours, who had been attempting to reach a trade agreement by mid-July.
The digital services tax, introduced by Canada last year and scheduled for enforcement with first payments due on Monday, imposes a 3% levy on tech giants such as Amazon, Apple, and Google.
Business estimates suggest the tax could cost U.S. companies over $2 billion annually.
Announcing the move online, Trump stated, “We are hereby terminating ALL discussions on Trade with Canada, effective immediately,” adding, “We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.”
This escalation comes amid an already fraught relationship, marked by reciprocal tariffs and a threat by Trump earlier in the year to “annex Canada using economic force.”
Despite the hostile rhetoric, Canadian Prime Minister Mark Carney indicated a continued willingness to negotiate.
“We will continue to conduct these complex negotiations in the best interest of Canadians,” Carney told reporters.
The two leaders had last met in the White House on May 6, 2025, and observers had hoped Carney’s reportedly cordial rapport with Trump might ease trade tensions.
However, Trump’s latest statement has thrown those prospects into question.
The Canadian Chamber of Commerce, a critic of the tax, emphasized the unpredictability of the process.
Its chief executive, Candace Laing, said, “Last-minute surprises should be expected” as the deadline looms. “The tone and tenor of talks has improved in recent months, and we hope to see progress continue,” she added.
Trade policy expert Inu Malak of the Council on Foreign Relations noted that the digital tax issue had previously remained unresolved in a U.S.-UK deal earlier this year. She viewed Trump’s announcement as part of his familiar pressure tactics.
“It does provide a bit of an opening—maybe not the one that Prime Minister Carney wanted … but it does provide some space for them to hasten those talks,” she said.
Canada relies heavily on trade with the U.S., which purchased over $400 billion in Canadian goods last year.
But earlier in 2025, Trump imposed a 25% tariff on Canadian imports, citing concerns over drug smuggling.
Additional U.S. tariffs on cars, steel, and aluminium have further disrupted North American supply chains.
Though Trump later allowed exemptions on certain goods following backlash from businesses in both countries, Canada responded with retaliatory tariffs of its own.
On Wall Street, U.S. stocks initially dropped following Trump’s announcement but later rebounded, with the S&P 500 closing at a record high on Friday.
