President Donald Trump announced Friday that the United States is immediately ending all trade discussions with Canada and will impose new tariffs within the next week in response to Canada’s move to implement a digital services tax.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump posted on social media. “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 announcement sent shockwaves through financial markets. The Canadian dollar fell more than 0.5%, while the country’s benchmark equity index dropped. Shares of trade-reliant companies, including General Motors and Canada Goose Holdings, also declined.
According to Canada’s finance department, the new digital services tax is set to take effect today. This tax would apply a 3% levy on digital services revenue earned from Canadian users above $14.6 million annually. Companies such as Meta Platforms and Alphabet are expected to be affected.
However, U.S. business groups have opposed the measure, warning it would raise costs and provoke retaliation. A bipartisan group of 21 lawmakers recently urged Trump to act, estimating the tax could cost U.S. companies $2 billion.
While the U.S. reached a deal with the Group of Seven nations to exclude American firms from some international digital taxes in exchange for dropping the Section 899 “revenge tax,” Canada’s levy was not addressed in that agreement. The Canadian government has stated that the tax aligns with similar policies adopted by countries such as the U.K.
Trump has already imposed tariffs on Canada and Mexico earlier this year in separate disputes over fentanyl trafficking and migration. Current talks with those nations are on a different track from broader tariff negotiations, which are set to impact dozens of countries by a July 9 deadline.
Last week, Canadian Finance Minister Francois-Philippe Champagne hinted that the digital tax could be open to renegotiation during future trade talks with the U.S.
