The ongoing trade discussions between the U.S. and Canada have just hit a major snag.
President Donald Trump announced that the U.S. is putting a pause on all trade talks with Canada, triggered by Canada’s decision to move forward with a new tax targeting big technology companies.
Trump’s Strong Words on Canada’s Tax Decision
Taking to his platform Truth Social, Trump didn’t hold back.
He slammed the Canadian digital services tax as “a direct and blatant attack” on the United States, and declared that talks are now terminated immediately.
He promised that within the next seven days, Canada will be informed about new tariffs the U.S. plans to impose on Canadian businesses wanting to operate in America.
What Is the Canadian Digital Services Tax?
Set to roll out this Monday, Canada’s digital services tax is a 3% levy on revenues generated from Canadian users by tech giants like Amazon, Google, Meta, Uber, and Airbnb.
What’s more, this tax will be applied retroactively, meaning U.S. companies could face an unexpected bill of about $2 billion by the end of the month.
A Broader Battle Over Tech Taxes
Trump has repeatedly expressed frustration with digital services taxes in trade talks with various countries, labeling them “non-tariff trade barriers” that unfairly target American tech firms.
He accused Canada of following the European Union’s lead with what he called an “egregious” tax move.
The Bigger Trade Picture Between the U.S. and Canada
Earlier this year, Trump slapped steep tariffs on Canada — a move tied to concerns over fentanyl trafficking and migration issues.
While some countries are racing to negotiate to avoid reinstated higher tariffs due by July 9, Canada and Mexico are being handled separately on a different track due to these unique challenges.
Trump’s Recent Visit to Canada and Ongoing Negotiations
President Trump was in Canada just earlier this month for the G7 summit but cut his visit short to deal with tensions in Iran.
Meanwhile, Treasury Secretary Scott Bessent revealed that several countries might agree to pause their digital services taxes in exchange for Republican lawmakers dropping a “revenge tax” proposal on foreign investors included in Trump’s economic bill.
However, the exact countries involved remain unclear.
What’s on the Horizon?
For now, the future of U.S.-Canada trade talks looks uncertain, with the clock ticking on Canada’s tax implementation and the U.S. response looming.
Businesses on both sides of the border are watching closely to see how this dispute will unfold and what impact it may have on trade relations going forward.