President Donald Trump has abruptly terminated all trade discussions with Canada. Citing its newly introduced digital services tax targeting U.S. tech giants as “egregious” and “a blatant attack” on American companies.
Economic Blowback and Political Tensions Deepen on Canada
Trump announced the move via Truth Social on June 27, declaring that the talks are “terminated… effective immediately.” He insisted that Canada would soon learn “the tariff they will be paying” for its tech tax, and mentioned a possible U.S. Trade Representative investigation under Section 301 to assess economic damages.
Canada’s Prime Minister Mark Carney responded sharply, calling the decision a “very direct attack” and reaffirmed that Canada would “continue these complex negotiations in the best interests of Canadians”. He emphasized that stopping discussions would harm both nations amid deep economic ties, with the U.S. accounting for around 75% of Canadian exports.
Analysts warn that pulling the plug on negotiations could escalate a broader North American trade war. The digital tax, levied retroactively from 2022, is expected to cost U.S. tech firms billions—estimates suggest payouts could reach $3 billion initially, plus more yearly.
Financial markets reacted quickly. U.S. indexes briefly dipped on the news, but S&P 500 and Nasdaq ultimately closed at record highs as rate cut optimism helped offset trade concerns.
While the announcement heightens immediate tensions, Canada insists it won’t back down. Carney noted that Ottawa plans to contest the tax under USMCA rules and explore retaliatory measures if necessary . Officials from both countries did hold trade negotiations earlier this summer, but Trump’s sudden statement caught many off guard.
Trump’s decision marks a sharp escalation in tech-related trade conflicts. It signals that any future U.S.–Canada trade talks will face renewed strain unless Canada reverses its digital services tax. However, market resilience suggests investors still expect a resolution—if not now, then over the longer term.
