WASHINGTON / OTTAWA – June 29:
US President Donald Trump has abruptly ended all trade negotiations with Canada, retaliating against Canada’s new digital services tax targeting major tech companies. Calling the move a “direct and blatant attack” on the United States, Trump declared on Friday that Canada will soon face new tariffs unless the policy is reversed.
In a Truth Social post, Trump stated:
“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 Tax Dispute
Canada’s Digital Services Tax Act, passed on June 20, 2024, imposes a 3% levy on digital services revenue generated from Canadian users, if the revenue exceeds CAD 20 million ($14.6 million) per year. The law came into effect on June 28 and is retroactively applicable from 2022, further raising US concerns.
While Canadian businesses and some global firms have called for a pause, citing increased costs and diplomatic risks, Ottawa has held firm. The Canada Revenue Agency is set to begin collecting the tax from Monday.
Trade Fallout
Canada and the US were reportedly nearing a new trade agreement, with a July signing previously expected. But Trump’s sudden announcement has thrown those talks into disarray.
Canadian officials responded cautiously:
“The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses,” said the office of Finance Minister François-Philippe Champagne.
Analysts React: ‘Escalation’ and Strategic Pressure
Trade and foreign policy experts view the move as typical of Trump’s hardline negotiation strategy, echoing past US actions against the EU over similar digital taxes.
Vina Nadjibulla of the Asia Pacific Foundation of Canada called it a “clear escalation” but warned that Ottawa must “find an off-ramp without giving in.” She urged coordinated responses with the EU and other digital tax proponents.
Rachel Ziemba, senior fellow at the Center for a New American Security, called the move “unsurprising” and a warning to Europe.
“This is as much about Brussels as it is about Ottawa,” she said.
Impact on Trade and Economy
Canada is the second-largest US trading partner, with over $760 billion in two-way trade in 2023, per US Census Bureau data.
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US goods exports to Canada: $349.4 billion
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Canadian exports to US: $412.7 billion
Any new tariffs could disrupt supply chains, raise consumer prices, and deepen economic stress amid already slowing Canadian growth and 7% unemployment.
Candace Laing, CEO of the Canadian Chamber of Commerce, warned:
“This tax is self-defeating… We hope calmer heads prevail to protect one of the world’s most important bilateral trade relationships.”
Next Steps
Trump’s administration is expected to announce specific tariffs within the coming week. Analysts say Canada could seek WTO recourse or align with the EU and OECD frameworks on fair taxation of tech giants like Google, Amazon, and Meta.
With both nations’ economies closely interlinked, the fallout from this latest standoff could prove significant — economically and politically — as both countries gear up for election seasons in 2025 and 2026.
