President Donald Trump on Friday abruptly terminated all U.S. trade negotiations with Canada in retaliation for Ottawa's imposition of a digital services tax targeting American technology companies. The announcement, delivered in a post on Trump's Truth Social platform, sent shockwaves through financial markets and threatened to destabilize one of America's largest trading relationships.
"Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately," Trump stated. "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."
The Canadian tax, set to begin collections Monday, applies a 3% levy on digital services revenue generated from Canadian users above a $20 million annual threshold. It will be applied retroactively to 2022, affecting U.S. tech giants including Amazon, Google, Meta, and Apple. Canadian officials confirmed earlier this month that they would not pause implementation despite repeated objections from Washington.
Trump accused Canada of "copying the European Union" with what he called a "direct and blatant attack on our Country." Speaking to reporters at the White House, he said, "They were foolish" to move forward with the tax, adding, "We have such power over Canada."
Treasury Secretary Scott Bessent criticized the retroactive nature of the tax Friday on CNBC, saying the administration had hoped Canadian Prime Minister Mark Carney's government would "put a brake on" the measure as a gesture of goodwill. He added that U.S. Trade Representative Jamieson Greer is expected to initiate a Section 301 investigation under the Trade Act of 1974 to assess harm to U.S. firms.
Bessent estimated the impact of the tax at $2 billion and suggested the U.S. would soon consider retaliatory tariffs, a tactic it has also used against European nations implementing similar digital levies.
The sharp escalation comes just weeks after Trump and Carney appeared to make progress during a G7 summit, agreeing to finalize a bilateral trade framework within 30 days. That prospect has now been derailed, with Trump stating Friday, the U.S. would "stop all negotiations with Canada right now until they straighten out their act."
The White House action sent markets into brief retreat, with both the S&P 500 and Nasdaq falling from earlier record highs before rebounding. Canada is the United States' second-largest trading partner, with bilateral goods trade totaling over $762 billion in 2024, according to the U.S. Census Bureau.
Carney's office issued a muted response, stating: "The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses."
