Trump Ends Trade Talks with Canada

President Donald Trump said Friday he is “terminating” all trade discussions with Canada, effective immediately, because of its Digital Services Tax, and that he would announce new tariffs on the country within the next seven days.

“We have just been informed that Canada, a very difficult Country to TRADE with … has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump said in a Truth Social post.

The decision came after Canada refused to delay the implementation of the tax for 30 days while the two countries negotiate a trade deal, White House National Economic Council Director Kevin Hassett said Friday afternoon on Fox Business Network. “They’re taxing American companies who don’t necessarily even have a presence in Canada,” Hassett said, calling the tax “almost criminal.”

“They’re going to have to remove it,” he said. “And I think they know that.”

Canadian Prime Minister Mark Carney and Trump had previously agreed to securea new economic and security deal by July 16, in which Canada was hoping Trump would lift tariffs on the country.

“We’ll continue to conduct these complex negotiations in the best interest of Canadians,” Carney said to reporters as he left his office Friday, after Trump had published the initial post. The prime minister’s office did not immediately comment on Hassett’s claim.

The president reemphasized his message later in the day.

“We have all the cards. We have every single one. We don’t want to do anything bad, but … economically we have such power over Canada. It’d rather not use it,” Trump said to reporters Friday in the Oval Office.

“Most of their business is with us,” he added, “and when you have that circumstance, you treat people better.”

A White House official said the president was “rightfully” angry. “We had been negotiating with Canada for them to lower their trade barriers, and then they go and erect a brand new one,” said the official, who was granted anonymity to discuss a sensitive issue. “So it’s obviously not helping their case.”

Canada has been working on its Digital Services Tax law since 2021, a process that included extensive public consultations before it came into law over a year ago. The law, which imposes a 3 percent tax on large foreign and domestic digital companies that make over C$20 million in revenue, is expected to come into force on Saturday. It applies to certain Canadian profits that companies make from online advertising, social media, online marketplaces and the sale and licensing of user data.

First payments are due Monday, but because the bill applies retroactively, U.S. companies such as Amazon, Google and Meta could be faced with a bill up to $3 billion, according to the Computer & Communications Industry Association.

Earlier this week, a Canadian official told POLITICO two meetings were scheduled with U.S. officials to discuss a deal. As of Friday afternoon, there was no announcement scheduled regarding the tax.

Trump’s post came as Carney was meeting with his Council on Canada-U.S. Relations. Carney, who texts Trump regularly, said he didn’t speak to Trump on Friday. His office did not get a heads-up that the president was going to call off trade talks, according to a senior government official who was granted anonymity to discuss a sensitive issue.

Carney faced immediate pressure from industry groups that called on him to drop the tax.

“Canada’s digital services tax unfairly targets U.S. companies, defies its USMCA commitments, and attempts to ring-fence the digital economy — undermining the global tax system,” Megan Funkhouser, senior director of the Information Technology Industry Council, said in a statement.

CCIA CEO Matt Schruers thanked the U.S. administration for its “decisive response” and called for an investigation into Canada’s digital tax.

About 90 percent of what Canada would collect under its Digital Services Tax Act would be from U.S. companies, members of Congress have argued.

“If Canada decides to move forward with this unprecedented, retroactive tax, it will set a terrible precedent that will have long-lasting impacts on global tax and trade practices,” 21 members of Congress wrote in a letter to Trump on June 11.

Last week Finance Minister François-Philippe Champagne said Canada wasn’t going to pause the tax despite pressure from Congress, business groups and industries.

“This was voted by Parliament so we’re going ahead with the DST,” Champagne told reporters.

“We had fairly long, extensive discussions at the G7 about the different [tax] regimes that you find in different parts of the world. The [digital services tax] is not unique to Canada, by the way,” he said. “Let’s put that into context. This is not the big thing. The big thing is all the other types of taxes you have around the world.”

Ontario Premier Doug Ford had been urging the federal government to delay the tax over concerns that it would derail negotiations between the two countries.

“For our American partners, this is nothing but an unfair tax that’s putting millions of Canadian jobs at risk,” Ford said in October.