Trump Ends Trade Talks With Canada Over Digital Services Tax, Tariff Announcement Imminent

President Donald Trump announced Friday that he is terminating trade negotiations with Canada following the country’s decision to implement a digital services tax (DST), which he described as “a direct and blatant attack” on the United States. A new tariff rate on Canadian imports is expected to be unveiled within the next week.

“Based on this egregious tax, we are hereby terminating ALL discussions on trade with Canada, effective immediately,” Trump wrote on Truth Social. “We will let Canada know the tariff they will be paying to do business with the United States within the next seven-day period.”

The move abruptly halts several months of discussions and escalates tensions between the two long-time trading partners. Canada’s DST, set to take effect Monday and retroactive to 2022, targets large digital companies—many of which are American tech giants like Google, Meta, and Amazon. Trump has previously criticized such taxes, calling them “non-tariff trade barriers.”

Treasury Secretary Scott Bessent confirmed that the White House was hoping Canada’s new administration under Prime Minister Mark Carney would delay or halt the tax as a sign of good faith. “This is something from the Trudeau years,” Bessent said on CNBC. “We were hoping the Carney administration would at least pause implementation. They seem not to have.”

Prime Minister Carney, however, indicated he remains open to resuming discussions. “We’ll continue to conduct these complex negotiations in the best interest of Canadians,” he told reporters.

Economic Fallout and Industry Reaction

If new tariffs are imposed, analysts warn they could trigger retaliatory measures from Canada, impacting both nations’ economies. Canada is currently the largest buyer of U.S. goods and the third-largest supplier of foreign goods to the U.S., with trade volumes in the hundreds of billions annually.

Industry leaders in Canada have raised concerns. Goldy Hyder, CEO of the Business Council of Canada, said: “For many years, we’ve warned that a unilateral DST could jeopardize our relationship with our most important trading partner. That unfortunate development has now come to pass.”

The Canadian Chamber of Commerce echoed the concern, calling the DST “self-defeating” and urging a swift diplomatic solution.

Tariff History and Implications

This isn’t the first time Trump has clashed with Canada over trade. During his first term, the U.S. imposed steep tariffs on Canadian steel, aluminum, and vehicles. Canada retaliated with tariffs of its own on American goods ranging from whiskey to appliances.

Though most Canadian goods have since been exempted under the U.S.-Mexico-Canada Agreement (USMCA), any new tariffs would likely disrupt this framework. Trump has hinted at returning to his sweeping “reciprocal tariff” model unless countries—Canada included—reach bilateral deals by his looming July 9 deadline.

Meanwhile, the White House remains in active talks with European countries, many of which also maintain DSTs. According to Bessent, “We’re in active discussions with them to take those down.”

Despite the trade tensions, U.S. stock markets closed higher on Friday. The S&P 500 and Nasdaq gained 0.52% to reach record highs, while the Dow rose 432 points, or 1%.