WASHINGTON — President Trump announced on Friday the suspension of trade discussions with Canada in response to its intention to proceed with a tax targeting technology companies. Trump decried Canada’s digital services tax as a direct attack on the United States.
In a message on his social media platform, Trump revealed that Canada had notified the U.S. of its plan to maintain the digital services tax, impacting both Canadian and international businesses engaged with Canadian online users. This tax is scheduled to be implemented on Monday.
“Due to this unwarranted tax, we are immediately halting all trade talks with Canada. They will be informed of the tariffs they will incur for trading with the United States within the next seven days,” Trump declared in his post.
This announcement marks another twist in the trade tensions that have characterized Trump’s second term since his inauguration in January. The relationship with Canada has seen numerous ups and downs, with Trump previously hinting at the idea of Canada becoming part of the United States.
Canadian Prime Minister Mark Carney responded on Friday, stating that Canada would keep negotiating in the best interests of its citizens. “This is a negotiation,” Carney emphasized.
Trump expressed confidence that Canada would eventually rescind the tax. In remarks from the Oval Office, he stated, “We possess so much economic power over Canada. We’d rather not wield it. This decision will not favor Canada, and it was an ill-advised move on their part.”
When asked about possible actions Canada could take to resume discussions, he suggested that removing the tax would be key, while asserting, “It doesn’t concern me either way.”
Carney had met Trump in May at the White House, maintaining a demeanor that was polite yet assertive. Trump recently attended the G7 summit in Alberta, where both leaders had set a 30-day deadline for trade negotiations.
The digital services tax will impose a 3% fee on revenues from Canadian users on companies like Amazon, Google, Meta, Uber, and Airbnb. It will be retroactive, leading to a $2 billion bill for U.S. companies payable by month’s end.
Matt Schruers, CEO of the Computer & Communications Industry Association, acknowledged the U.S. administration’s firm stance against Canada’s taxing of U.S. digital services in a formal statement.
Meanwhile, negotiations have been ongoing regarding reducing some of the significant tariffs President Trump placed on Canadian goods.
The President previously indicated the U.S.’s intent to notify various countries about new tariff rates soon to be imposed. He has applied 50% tariffs on steel and aluminum and 25% on automobiles. Additionally, a 10% import tax on most countries is in place, potentially subject to an upcoming increase.
Certain commodities are subject to separate 25% tariffs under initiatives to curb fentanyl smuggling, although the 2020 U.S.-Mexico-Canada Agreement still shields some goods.
After a private session with Republican senators on Friday, Treasury Secretary Scott Bessent refrained from commenting on Trump’s decision to end trade discussions with Canada.
He remarked briefly, “I was present during the meeting,” before fielding further questions.
A significant portion of U.S. energy imports like crude oil and electricity comes from Canada. Additionally, Canada stands as a primary supplier of steel, aluminum, uranium, and several critical minerals the Pentagon values.
Canada exports about 80% of its goods to the U.S.
Daniel Beland, a political science expert from McGill University, noted that the digital services tax has been a contentious point, affecting U.S. tech giants and straining Canada-U.S. relations. “The tax has been part of the Canadian legal framework for some time,” Beland pointed out. “President Trump is raising alarms just before it comes into effect amidst uncertain trade negotiations.”