By Emeka Blast 
Trade Talks Halted: Trump Terminates Discussions with Canada
U.S. President Donald Trump announced on Friday that the United States is immediately terminating all trade discussions with Canada, citing the country’s decision to impose a 3% digital services tax (DST) on American technology companies as a “direct and blatant attack” on the U.S. The move, detailed in a Truth Social post, marks a dramatic escalation in tensions between the two nations, which had been working toward a new trade agreement by mid-July.
“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies,” Trump wrote. “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. 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 DST, enacted by Canada in June 2024 and set to take effect on June 30, 2025, imposes a 3% levy on revenues over $20 million CAD ($14.6 million USD) generated from Canadian users by tech giants such as Amazon, Google, Meta, Uber, and Airbnb. The tax, retroactive to 2022, is expected to cost U.S. companies approximately $2 billion USD. American lawmakers, including former U.S. Trade Representative Katherine Tai under the Biden administration, have criticized the tax as discriminatory, noting that about 90% of its revenue will come from U.S. firms.
The announcement disrupts months of negotiations aimed at easing trade tensions, which intensified earlier this year when Trump imposed 25% tariffs on Canadian goods, including 50% tariffs on steel and aluminum and 25% on autos, citing issues like fentanyl smuggling. Canada retaliated with tariffs on U.S. exports, straining the integrated North American economy. The U.S.-Mexico-Canada Agreement (USMCA), negotiated during Trump’s first term, was set to be renegotiated by 2026, with both sides hoping to finalize a new deal by July 21, 2025.
Canadian Prime Minister Mark Carney, who met Trump at the G7 summit in Alberta earlier this month, expressed optimism last week about reaching a trade deal within 30 days. Following Trump’s announcement, Carney’s office issued a brief statement: “The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses.”
Analysts suggest Trump’s move may be a pressure tactic to gain leverage in negotiations, a strategy he has employed previously. Vina Nadjibulla, vice president of research at the Asia Pacific Foundation of Canada, noted, “This is definitely escalation from Trump, but we have seen this tactic before. Canada will need to work behind the scenes to find an off-ramp without giving into his demands.” Senator Hassan Yussuff, a member of the Canada-U.S. advisory council, echoed this sentiment, stating, “He’s trying to gain leverage on us… we just stop reacting and we’ll negotiate if we can get a good deal.”
The U.S. is Canada’s largest trading partner, with Canada importing $349.4 billion in U.S. goods and exporting $412.7 billion to the U.S. in 2024, according to U.S. Census Bureau data. The abrupt halt in talks threatens supply chains, particularly in industries like automotive, where parts cross borders multiple times.
Trump’s decision follows a day of mixed trade signals. Earlier Friday, Treasury Secretary Scott Bessent suggested flexibility on a July 9 deadline for broader tariff negotiations with over 200 countries, hinting at a possible extension to Labor Day. The U.S. also announced a trade framework with China, building on a May truce. However, Trump’s focus on Canada’s DST, which he accused of “copying the European Union,” underscores ongoing frustrations with digital taxes globally.
As markets closed, the S&P 500 and Nasdaq briefly dipped but recovered to record highs, suggesting investors remain cautiously optimistic despite the uncertainty. Trump’s promised tariffs on Canada, to be detailed within a week, could further complicate relations with one of America’s closest allies.
