U.S. President Donald Trump says he’s terminating all trade discussions 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,” Trump said in a social media post Friday.
Canada and the U.S. have been locked in negotiations to get Trump to lift his punishing tariffs on Canadian goods, levies that have already led to major economic dislocations, job losses and a drop in southbound exports. Trump and Prime Minister Mark Carney agreed at the G7 last week to reach some agreement on the trade dispute within 30 days — a timeline that is now very much in doubt.
Trump says he’s pulling back from the bilateral trade discussions because Canada plans to move ahead with its digital services tax (DST), which requires web giants to pay a special tax.
Speaking briefly to reporters while leaving his office, Carney said he had not spoken to Trump since the president seemed to torpedo the trade talks.
“We’ll continue to conduct these complex negotiations in the best interest of Canadians,” Carney said. He did not address a reporter’s question about whether his government is prepared to drop the DST.
Set to take effect on June 30, the DST would have U.S. companies like Amazon, Google, Meta, Uber and Airbnb pay a three per cent levy on revenue from Canadian users — a policy enacted by former prime minister Justin Trudeau’s government that the Parliamentary Budget Office projects will bring in billions of dollars in revenue.
While taking effect on Monday, the policy will apply retroactively, leaving U.S. companies with a $2-billion US bill due at the end of the month.
These global digital firms are often able to skirt paying taxes in the countries where they operate, and the last Liberal government pitched the DST as a way to bring the tax code up to date and capture revenues earned in Canada by firms located abroad.
U.S. long opposed DST
It’s been a bone of contention between Canada and the U.S. for years, with former president Joe Biden’s ambassador to Canada warning during his tenure that, if a DST was enacted, the U.S. would hit back.
While Canada and other Organization for Economic Co-operation and Development (OECD) countries had been discussing some sort of global DST, the Trudeau government decided to move ahead with its own tax rather than wait for co-ordinated action.
Carney’s finance minister, François-Philippe Champagne, said last week Ottawa plans to push ahead with the tax even while negotiations with Trump and his tariffs are ongoing.
That’s what’s prompted the president’s ire.
“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, 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.
As he has done in the past, Trump mischaracterized Canada’s tariff regime on U.S. dairy products.
The high tariff rates Trump frequently cites are only applied if U.S. exports exceed a set “tariff-rate quota,” something that has never happened.
Trump’s own Department of Agriculture noted earlier this year that almost all agricultural products traded between the United States and Canada are free of tariffs.
The abrupt decision to call off negotiations may have caught Canadian officials off guard.
Speaking to CBC Radio’s The House hours before Trump’s post, Canada-U.S. Trade Minister Dominic LeBlanc said Canada’s negotiators “continue to be optimistic about the constructive tone” between the two countries.
“We’re developing a constructive, professional, businesslike relationship with our American interlocutors while working to get the best economic deal we can for Canadians. So we’ll see,” LeBlanc said.
