U.S. President Donald Trump stated that he has officially ended trade negotiations with Canada and plans to unveil a new tariff rate for the country soon. Trade talks, which had been underway for several months, were terminated after Canada declared a digital services tax. Trump characterized the move as ‘a direct and blatant attack’ on the United States.
“Based on this egregious tax, we are hereby terminating all discussions on trade with Canada, effective immediately,” Trump wrote on Truth Social on Friday. He also stated that he would introduce new tariffs on Canada within the next few days.
Canada’s 3% digital services tax, introduced last year, has remained a major point of tension in its trade relationship with the United States. With the first payments scheduled for Monday, business groups project that the tax could cost major U.S. tech firms like Amazon, Apple, and Google over $2 billion annually. Similar digital levies have already been implemented in countries such as the United Kingdom, France, and Italy.
Canadian officials anticipated resolving the matter through trade discussions with the United States. However, Trump’s recent action has thrown the prospects of a future agreement into uncertainty.
In response to President Trump’s decision, Prime Minister Mark Carney’s office issued a brief statement reaffirming Canada’s commitment to continuing its trade discussions with the United States, with a focus on protecting the interests of Canadian workers and businesses.
Canada’s Digital Services Tax Act (DSTA), which took effect in June 2024, imposes a levy on revenue earned from Canadian users by tech companies. Initially introduced during the 2019 federal election campaign by former Prime Minister Justin Trudeau, the legislation was passed on June 20, 2024, and officially implemented on June 28.
Unlike conventional corporate taxes that apply to net profits, the DSTA focuses on taxing gross revenue derived from user interactions within Canada.
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