Trump ends trade talks with Canada over digital tax dispute
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Washington: President Donald Trump on Friday announced the immediate suspension of trade talks with Canada, condemning its decision to proceed with a digital services tax as “a direct and blatant attack on our country.”
Posting on his social media network, Trump said Canada had officially informed the United States of its plan to go ahead with the tax, which is set to take effect Monday. The digital services tax, which will apply retroactively, imposes a 3 per cent levy on revenue earned by Canadian and foreign tech firms that engage with online users in Canada. US companies including Amazon, Google, Meta, Uber, and Airbnb are expected to be hit with a combined bill of USD 2 billion by the end of the month.
“Based on this egregious tax, we are hereby terminating ALL discussions on trade with Canada, effective immediately,” Trump declared in his post. “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 marked another dramatic turn in Trump’s trade strategy since beginning his second term in January. His relationship with Canada has remained unpredictable, at times suggesting the US would absorb its northern neighbour as a state. Despite attending the G7 summit in Alberta last week and agreeing to a 30-day deadline for resolving trade issues, Trump has now brought the discussions to a halt.
Canadian Prime Minister Mark Carney responded by stating that Canada would continue negotiations in the best interest of its citizens. “It's a negotiation,” he said.
Trump later told reporters in the Oval Office that he expects Canada to eventually drop the tax. “Economically, we have such power over Canada. We’d rather not use it,” he said. “It’s not going to work out well for Canada. They were foolish to do it.”
When asked whether Canada could take any steps to restart talks, Trump said it could remove the tax but added, “It doesn't matter to me.”
The digital services tax has drawn sharp criticism from the US tech industry. Matt Schruers, president of the Computer & Communications Industry Association, applauded the US administration’s response, calling the Canadian tax “discriminatory” against American digital exports.
Canada and the US had also been in talks to ease steep tariffs previously imposed by Trump on various Canadian goods. The US president has implemented tariffs of 50 per cent on steel and aluminium, 25 per cent on automobiles, and a 10 per cent general tax on imports from most countries, with the possibility of increasing rates on July 9, following the expiration of a 90-day negotiation period.
Canada and Mexico were also targeted with tariffs of up to 25 per cent under Trump's stated aim of curbing fentanyl smuggling, though some trade protections remain in place under the 2020 US-Mexico-Canada Agreement (USMCA) signed during his first term.
When asked about the status of trade negotiations, US Treasury Secretary Scott Bessent declined to provide details, saying only, “I was in the meeting,” before moving on.
Trade between the two nations remains deeply intertwined. Approximately 60 per cent of US crude oil imports and 85 per cent of its electricity imports come from Canada. Canada is also the top foreign supplier of steel, aluminium, and uranium to the US and possesses 34 critical minerals and metals deemed essential by the Pentagon. Approximately 80 percent of Canada’s exports are destined for the US.
Political science professor Daniel Béland of McGill University noted that while the tax is a domestic Canadian policy, it has long been a point of tension between Ottawa and Washington. “The Digital Services Tax Act was signed into law a year ago, so the advent of this new tax has been known for a long time,” Béland said. “Yet, President Trump waited just before its implementation to create drama over it in the context of ongoing and highly uncertain trade negotiations between the two countries.”
With PTI inputs
