Trump Cuts Trade Talks with Canada over Digital Tax, Threatens New Tariffs

U.S. President Donald Trump on Friday abruptly suspended all trade negotiations with Canada, slamming its digital services tax as “a direct and blatant attack on our country.”

The move came after Canada informed Washington it would proceed with the tax, which imposes a 3% levy on revenue earned by digital giants such as Amazon, Google, Meta, Uber, and Airbnb from Canadian users. The tax takes effect Monday and will apply retroactively, potentially leaving U.S. tech firms facing a $2 billion bill.

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

Canadian Prime Minister Mark Carney responded by saying Ottawa would continue negotiations in the best interests of Canadians, noting, “It’s a negotiation.”

The diplomatic rift marks the latest twist in Trump’s renewed trade offensive since returning to office in January. While trade talks with Canada had shown signs of progress—especially during Trump’s visit to Alberta for the G7 summit earlier this month—tensions resurfaced with the digital tax dispute.

During that summit, both sides had agreed to a 30-day deadline for progress. However, Trump’s administration now appears poised to retaliate. The president has already imposed sweeping tariffs, including 50% on steel, 25% on autos, and 10% on most imports. Further increases could follow after July 9, once his self-imposed 90-day negotiation window closes.

Canada and Mexico also face specific tariffs of up to 25%, introduced under Trump’s first-term US-Mexico-Canada Agreement. Trump has justified those measures as part of broader efforts to combat fentanyl smuggling, though critics argue they are economically punitive.

Despite the growing strain, Carney has remained diplomatic. During a May visit to the White House, he maintained a firm but cordial tone. On Friday, his office reiterated that Canada “would not back down” on measures aimed at taxing large digital corporations.

Meanwhile, Trump said the U.S. is preparing to notify several countries of revised tariff rates in the coming weeks.

As the standoff escalates, business leaders and trade analysts warn the dispute could further disrupt U.S.-Canada economic ties, just as both countries attempt to stabilize post-pandemic growth.