President Donald Trump announced Friday that the United States will suspend ongoing trade negotiations with Canada in response to Canada’s decision to proceed with a digital services tax targeting major technology companies.
In a post on his social media platform, Trump described Canada’s digital tax as “a direct and blatant attack” on the United States, saying, “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.” He added that Canada would be informed of new U.S. tariffs on its exports within the next seven days.
The digital services tax, set to take effect Monday, will apply a 3% levy on revenue earned by large technology companies from Canadian users. The measure is expected to impact firms such as Amazon, Google, Meta, Uber, and Airbnb. The tax is retroactive, resulting in an estimated USD 2 billion bill for affected U.S. companies by the end of the month.
Canadian Prime Minister Mark Carney responded Friday, stating that Canada would continue negotiations in the best interests of Canadians. He emphasized, “It’s a negotiation.” Carney and Trump previously met in May at the White House, and the two sides had agreed to a 30-day deadline for talks during the G7 summit in Alberta.
Speaking at the Oval Office, Trump said he expects Canada will eventually remove the tax but warned that failure to do so could have economic consequences. “Economically, we have such power over Canada. We’d rather not use it,” he said, adding, “It’s not going to work out well for Canada.”
The Computer & Communications Industry Association, which represents several major U.S. tech firms, welcomed the administration’s swift response. “We appreciate the Administration’s decisive response to Canada’s discriminatory tax on U.S. digital exports,” said CEO Matt Schruers in a statement.
The tax dispute comes as the U.S. and Canada have been discussing possible easing of tariffs that Trump previously imposed on Canadian steel, aluminum, and autos. The administration has maintained tariffs of up to 50% on steel and aluminum and 25% on vehicles and auto parts. A broader 10% tax on imports from most countries also remains in place and could rise in July when a 90-day negotiating period expires.
About 80% of Canada’s exports go to the U.S., including significant volumes of crude oil, electricity, steel, aluminum, uranium, and critical minerals. Canada is also a key foreign supplier of these materials to the U.S. defense sector.
While the digital tax has been planned for some time, experts say it has been a recurring source of tension. Daniel Beland, a political science professor at McGill University, noted, “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. Yet, President Trump waited just before its implementation to create drama over it in the context of ongoing and highly uncertain trade negotiations.”
Treasury Secretary Scott Bessent declined to comment on the suspension of trade talks when asked by reporters Friday, saying only, “I was in the meeting,” before moving on to other questions.
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