President Donald Trump has abruptly ended all trade talks with Canada. The move came after Canada introduced a digital services tax that the U.S. sees as unfair to American tech companies. Trump called the tax “egregious” and said that Canada would soon be hit with new tariffs.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump posted on social media Friday. He added that a new tariff rate would be announced within the next seven days.
This surprise announcement marks a major shift in U.S.-Canada relations. The two countries traded over $900 billion in goods and services last year, making their partnership one of the largest in the world. Only a week earlier, Trump and Canadian Prime Minister Mark Carney had met at the G7 summit and agreed to work toward a new trade deal by mid-July.
Now, those efforts are on hold.
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Shortly after Trump’s post, U.S. Treasury Secretary Scott Bessent said on CNBC that the administration may begin a Section 301 investigation into Canada. This is the same legal tool used against China to raise tariffs and push for changes in trade practices.
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Section 301 gives the U.S. the power to take strong action against countries it believes are hurting American businesses. If this investigation moves forward, it could lead to higher import taxes on Canadian goods.
The digital services tax in question targets large tech companies that operate in Canada but are mostly based in the U.S. The Trump administration views this tax as a direct attack on American business interests.
Tensions were already high. Earlier this year, the U.S. imposed tariffs on Canadian steel, aluminum, and cars, citing fentanyl trafficking and border issues. Canada was treated differently from other countries facing a July 9 deadline for broader tariff increases, but that special track now seems uncertain.
Markets React and Canada Responds
Markets quickly felt the impact of Trump’s announcement. The Canadian dollar fell more than 0.5% right after the post before recovering. Canada’s main stock index dropped by 0.2% for the day.
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Several companies that rely on U.S.-Canada trade were affected. This includes automakers like General Motors and clothing brand Canada Goose Holdings, whose shares dipped on the news.
Canadian Prime Minister Mark Carney, when asked for a response, said he had not spoken with Trump since the post. “We’ll continue to conduct these complex negotiations in the best interests of Canadians,” he told reporters after a meeting on Friday.
The sudden halt in talks follows months of rising tension. Many Canadians have already started boycotting U.S. products and avoiding American travel destinations in response to earlier trade moves. This latest escalation is likely to fuel more frustration on both sides of the border.
While other countries face a July 9 tariff deadline, Canada and Mexico had been negotiating separately. But now, those talks appear to be in jeopardy as Trump takes a firmer stance against what he sees as unfair policies.