- Trump cut off trade talks with Canada after it imposed a digital tax on U.S. tech firms, calling it an “attack” on the U.S.
- The tax, due June 30, could cost American companies up to $3 billion and applies retroactively to 2022 earnings.
- Markets reacted negatively to the news, and Trump warned that a new tariff on Canadian goods will be announced within seven days.
President Donald Trump announced Friday that the U.S. is pulling the plug on trade discussions with Canada. The move came after Canada’s decision to roll out a new digital services tax targeting big tech companies — many of which are American. In a post on Truth Social, Trump didn’t hold back, calling the tax “a direct and blatant attack” on the U.S.
“Based on this egregious tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump wrote. He also warned that a new tariff on Canadian goods would be announced within the week. So far, Canada’s Prime Minister Mark Carney hasn’t responded publicly.
Why the Tax Sparked This Fallout
The Canadian digital services tax affects any tech firm pulling in over $15 million from Canadian users. What’s really heating things up is that it’s retroactive to 2022, and the first payments — possibly costing U.S. firms up to $3 billion — are due June 30. Despite U.S. objections, Canada’s finance minister recently said they wouldn’t delay the rollout, even with trade talks ongoing.
This sudden trade freeze ends what had been a relatively smooth patch for U.S. markets. Those calm waters helped the S&P 500 hit new highs earlier this year. But right after Trump’s post hit social media, the S&P and Nasdaq both dipped into negative territory.
Tariffs, Deadlines, and What’s Next
Interestingly, earlier Friday, Treasury Secretary Scott Bessent had offered a glimmer of flexibility. He hinted that the original July 9 deadline for securing new trade deals might be extended to Labor Day. Trump later echoed that idea, saying the deadline could move in either direction. But Canada’s decision seems to have hardened his stance — at least for now.
Canada is no small player here. It’s the U.S.’s second-largest trading partner and already faces a mix of tariffs under Trump’s trade regime. Non-compliant Canadian goods are taxed at 25%, with a few exceptions like energy, which gets a 10% rate. Canadian steel and aluminum? They’re hit with a whopping 50% tax. Auto imports are also in that 25% zone. This new standoff could make things worse on both sides of the border.
