President Donald Trump said Friday (Saturday AEST) he has put an end to trade talks with Canada and will soon announce a new tariff rate for that country, he said in a Truth Social post on Friday.
The decision to end negotiations, which have been ongoing for several months, came after Canada announced a digital service tax, Trump said, calling it “a direct and blatant attack on our Country.”
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” he said.
“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.”
Trump has taken particular issue with DSTs throughout trade negotiations with other countries, commonly referring to them as “non-tariff trade barriers.”
Canada has a new DST that is set to take effect on Monday that will be retroactive to 2022.
Digital services taxes are a way for countries to tax online services, in contrast to taxes on physical products.
Countries with these taxes can collect revenue from large companies that operate online — even if the business is unprofitable.
American firms, especially Big Tech companies such as Meta, Apple, Google, Amazon and Microsoft, are disproportionately affected by DSTs, according to a report published last year by the nonpartisan Congressional Research Service.
Prime Minister Mark Carney said on Friday he wants to continue negotiating with the US.
“We’ll continue to conduct these complex negotiations in the best interest of Canadians. It’s a negotiation,” Carney said to reporters.
“We knew (the tax) was coming. We hoped they wouldn’t do it,” Treasury Secretary Scott Bessent said Friday on CNBC.
“We think it’s patently unfair to do it retroactively. This is something from the Trudeau years, so we were hoping, as a sign of goodwill, that the new Carney administration would at least put a break on that during the trade talks. They seem not to have,” Bessent added.
If the Canadian government moves forward with the tax, Bessent said Trump is prepared to impose higher tariffs across all Canadian goods, without specifying a rate.
Canada is the top buyer of American goods, importing $534.6 billion worth last year, according to Department of Commerce data.
Meanwhile, Canada shipped $632.6 billion worth of goods to the US last year, the third-highest source of foreign goods.
Levying higher tariffs on Canada would likely cause the country to retaliate by imposing higher tariffs on American goods. That would take a toll on both countries’ economies.
Prime Minister Mark Carney’s office told CNN the Canadian government is considering its response.
In a social media post, Pierre Poilievre, the leader of Canada’s Conservative Party, wrote that he hopes both countries can return to the negotiating table.
“Disappointed that trade talks have halted. Hopefully they resume quickly,” he wrote.
Several Canadian businesses and groups CNN has spoken to have been pushing the government not to move forward with the tax, fearing they could cause trade tensions to escalate between the US.
“For many years, the Business Council of Canada has warned that the implementation of a unilateral digital services tax could risk undermining Canada’s economic relationship with its most important trading partner, the United States,” Goldy Hyder, president and Chief Executive Officer of the Business Council of Canada, said in a statement to CNN on Friday.
“That unfortunate development has now come to pass.”
“In an effort to get trade negotiations back on track, Canada should put forward an immediate proposal to eliminate the DST in exchange for an elimination of tariffs from the United States.”
The Canadian Chamber of Commerce echoed those sentiments.
“Our position on the Digital Services Tax has been consistent, but primarily for the reason that it’s self-defeating in nature.
That said, it’s a pivotal time for Canada-US relations,” Candace Laing, president and Chief Executive Officer of the Canadian Chamber of Commerce, said in a statement to CNN.
“The tone and tenor of talks has improved in recent months, and we hope to see progress continue.”
“We respect that Team Canada is conducting these negotiations at the table, and we need to give them the space to navigate.”
At the start of his second term, Trump threatened to impose a 25 per cent tariff across all Canadian exports, with rates going even higher for specific products.
However, as it stands, most Canadian goods have been exempt from those 25 per cent tariffs, as long as they comply with the United States-Mexico-Canada Agreement he negotiated in his first term.
The biggest exceptions, with some fine print, are the 25 per cent tariffs on all foreign cars, car parts, steel and aluminium.
Trump later doubled the tariff on all steel and aluminium imports to 50 per cent.
Goods coming from Canada that were not USMCA-compliant have faced a combined 50 per cent tariff rate.
In response to those auto tariffs, Canada levied a 25 per cent tariff on US-made vehicles that aren’t compliant with USMCA.
Canada also retaliated against Trump’s initial 25 per cent steel and aluminium tariffs by rolling out a 25 per cent tariff on roughly $65.8 billion worth of US goods, including whiskey, sporting gear and household appliances.
Dozens of other countries could soon face higher tariffs as a July 9 deadline looms for “reciprocal” tariffs announced in April to resume unless the impacted countries ink trade deals with the United States.
It’s unclear if Trump will end up extending that deadline further and where tariff rates could end up.
Several European Union countries also have DSTs, however, Bessent said on Friday, “We’re in active discussions with them to take those down.”
Stocks closed higher Friday despite Trump’s latest tariff threat.
The S&P 500 and the tech-heavy Nasdaq, which had dipped into the red after his post, both gained 0.52 per cent to close at record highs.
The Dow gained 432 points, or 1 per cent.
