President Donald Trump just dropped a bombshell by slamming the brakes on trade talks with Canada, citing their pesky digital services tax as the dealbreaker.
The Wall Street Journal reported that in a stunning move via social media on Friday, Trump announced the immediate termination of all trade discussions with Canada, a decision rooted in ongoing disputes over a 3% tax targeting American tech giants like Amazon and Google, alongside escalating tariff battles.
This isn’t a sudden spat—tensions have been simmering for months. Earlier this year, Trump slapped a hefty 25% tariff on Canadian goods, pointing to border security concerns, while Canada retaliated with tariffs of their own.
Both nations have seen supply chains, especially for cars and steel, take a hit as parts crisscross borders multiple times.
The core of this clash? Canada’s digital services tax, enacted last year, which business groups estimated will cost U.S. companies over $2 billion annually. It’s no surprise that Trump’s administration, which has long opposed such taxes globally, sees this as a direct jab at American innovation.
Trump didn’t mince words on social media, declaring, “We are hereby terminating ALL discussions.” That’s a clear signal he’s done playing nice over a policy he views as unfairly targeting U.S. businesses while progressive agendas abroad get a free pass.
Adding fuel to the fire, Trump promised new tariffs on Canadian goods within the next seven days. “We will let Canada know the Tariff that they will be paying,” he warned online, hinting at more economic pressure to come. It’s a classic Trump move—using tariffs as a hammer to force concessions.
Just months ago, hopes were high for a resolution. Trump and Canadian Prime Minister Mark Carney met at the White House on May 6, and their cordial rapport seemed like a potential bridge over troubled waters.
A mid-July deadline for a trade deal was set at the G7 meeting in mid-June, though Trump’s latest outburst throws that timeline into chaos.
Carney, for his part, remains diplomatic, stating, “We will continue to conduct these complex negotiations.” But let’s be real—when Trump says he’s out, it’s hard to see how Canada’s polite persistence can salvage this without major concessions on that digital tax.
Candace Laing of the Canadian Chamber of Commerce tried to sound optimistic, noting, “The tone and tenor of talks has improved.” Improved? With Trump pulling the plug, that’s a stretch—sounds more like wishful thinking than a realistic assessment of this trade war.
The U.S. isn’t just any trade partner for Canada—it’s the biggest, buying over $400 billion in goods last year under a longstanding free trade agreement.
Trump’s reminder to reporters, “We have all the cards,” underscores his belief that America holds the leverage here. And economically, he’s not wrong—Canada’s reliance on U.S. markets gives Washington a strong upper hand.
Yet, businesses on both sides are feeling the squeeze. New U.S. tariffs on cars, steel, and aluminum have snarled supply chains, though Trump did offer exemptions for some goods after pushback. Still, the uncertainty is a nightmare for industries that thrive on cross-border stability.
Wall Street took a brief hit on Friday after Trump’s announcement, with stocks dipping before the S&P 500 rebounded to a record high. It’s a sign that markets are jittery but not yet panicked—perhaps betting on Trump’s history of using social media threats as a negotiation tactic, as seen recently with the EU.
Canada isn’t alone in taxing digital services—nations like the UK, France, and Italy have similar policies, which Trump’s team has historically opposed.
A recent U.S.-UK trade deal left this issue unresolved, hinting at possible wiggle room if Canada plays its cards right. But with first payments on Canada’s tax due Monday, the clock is ticking.
Goldy Hyder of the Business Council of Canada argued on Friday that lifting the digital tax is key “to get trade negotiations back on track.” That’s a sensible take, but expecting Canada to fold entirely might ignore the political pressures Carney faces at home to stand firm against U.S. demands.