Trump is dissatisfied with Canada’s digital service tax and announced the immediate termination of US-Canada trade negotiations
Trump’s announcement on social media comes as the two countries were trying to reach a trade deal by mid-July. Trump had previously triggered a trade war that led to the two countries imposing tariffs on each other’s goods and even threatening to annex Canada by “economic force.”
Trump said on Friday that he decided to end negotiations due to what he called “evil taxes” on technology companies and said he would announce a new round of tariffs on cross-border goods within the next week. “We are hereby announcing that, effective immediately, all trade negotiations with Canada are terminated,” he wrote on social media.
“We will tell Canada in the next seven days how much tariffs they will have to pay in order to do business with the United States,” he said.
Canadian Prime Minister Mark Carney briefly responded to reporters’ questions and said that negotiations will continue. “We will continue these complex negotiations in the best interests of the Canadian people.”
Canada has implemented a 3% digital services tax since the legislation was passed last year. The tax system has been a point of contention in Canada-US relations. The first payment deadline is due on Monday. Business estimates say the tax will cost U.S. companies like Amazon, Apple and Google more than $2 billion a year.
Canadian officials had hoped to resolve the dispute in trade talks with the U.S. There had been optimism that the relatively cordial relationship between new Prime Minister Mark Carney and Trump would lead to a deal.
But Trump’s latest move casts uncertainty over the prospects for a future deal. Still, Trump has used threats on social media to gain negotiating advantage or speed up negotiations he sees as stalled. Last month, for example, he threatened to raise tariffs on EU imports, only to back off days later.
Candace Laing, chief executive of the Canadian Chamber of Commerce, said “temporary flare-ups should be expected” before a deal deadline. “The atmosphere has improved in recent months and we hope that progress will continue.”
The United States is Canada’s largest trading partner, exporting more than $400 billion of goods to the U.S. last year under a long-standing free trade agreement. But Trump earlier this year imposed new 25% tariffs on those trades, citing drug smuggling across the border.
The new U.S. tariffs on cars, steel and aluminum also have a serious impact on bilateral relations. For example, auto parts often shuttle back and forth between the United States, Mexico and Canada many times until the whole car is assembled. Such import taxes are threatening the entire supply chain.
Faced with a strong backlash from the U.S. and Canadian business community, Trump later also exempted some goods. Canada retaliated by imposing tariffs on some U.S. goods.
After Trump announced the suspension of negotiations, U.S. stocks fell on Friday, but then rebounded, and the S&P 500 index finally closed at a record high.
