Trump announces Cancellation of Trade Talks with Canada

President Donald Trump said Friday he is “terminating” all trade discussions with Canada, effective immediately, because of its Digital Services Tax, and that he would announce new tariffs on the country within the next seven days.

“We have just been informed that Canada, a very difficult Country to TRADE with … has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump said in a Truth Social post.

The decision came after Canada refused to delay the implementation of the tax for 30 days while the two countries negotiate a trade deal, White House National Economic Council Director Kevin Hassett said Friday afternoon on Fox Business Network. “They’re taxing American companies who don’t necessarily even have a presence in Canada,” Hassett said, calling the tax “almost criminal.” “They’re going to have to remove it,” he said. “And I think they know that.”

Canadian Prime Minister Mark Carney and Trump had previously agreed to securea new economic and security deal by July 16, in which Canada was hoping Trump would lift tariffs on the country.

“We’ll continue to conduct these complex negotiations in the best interest of Canadians,” Carney said to reporters as he left his office Friday, after Trump had published the initial post. The prime minister’s office did not immediately comment on Hassett’s claim. The president reemphasized his message later in the day.

“We have all the cards. We have every single one. We don’t want to do anything bad, but … economically we have such power over Canada. It’d rather not use it,” Trump said to reporters Friday in the Oval Office. “Most of their business is with us,” he added, “and when you have that circumstance, you treat people better.”

A White House official said the president was “rightfully” angry. “We had been negotiating with Canada for them to lower their trade barriers, and then they go and erect a brand new one,” said the official, who was granted anonymity to discuss a sensitive issue. “So it’s obviously not helping their case.”

Canada has been working on its Digital Services Tax law since 2021, a process that included extensive public consultations before it came into law over a year ago. The law, which imposes a 3 percent tax on large foreign and domestic digital companies that make over C$20 million in revenue, is expected to come into force on Saturday. It applies to certain Canadian profits that companies make from online advertising, social media, online marketplaces and the sale and licensing of user data.

First payments are due Monday, but because the bill applies retroactively, U.S. companies such as Amazon, Google and Meta could be faced with a bill up to $3 billion, according to the Computer & Communications Industry Association.

Trump’s post came as Carney was meeting with his Council on Canada-U.S. Relations. Carney, who texts Trump regularly, said he didn’t speak to Trump on Friday. His office did not get a heads-up that the president was going to call off trade talks, according to a senior government official who was granted anonymity to discuss a sensitive issue. Carney faced immediate pressure from industry groups that called on him to drop the tax.

“Canada’s digital services tax unfairly targets U.S. companies, defies its USMCA commitments, and attempts to ring-fence the digital economy - undermining the global tax system,” Megan Funkhouser, senior director of the Information Technology Industry Council, said in a statement.

Stock prices on Wall Street fell after Trump's announcement on Friday. But confidence later returned to the market and the S&P 500 index reached a record high.