Trump Cuts Off Trade Talks with Canada Amid Digital‑Services Tax Dispute
On June 27, 2025, President Donald Trump abruptly announced the termination of all trade negotiations with Canada, citing Ottawa’s new digital services tax (DST) on major U.S. tech firms as “a direct and blatant attack on our country” .
In a post on his social media platform, Truth Social, Trump called the levy “egregious” and accused Canada of copying the European Union’s approach. He wrote, “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately”, adding that new tariffs on Canadian goods would be announced within the next week .
The tax in question imposes a 3 percent charge on revenue that U.S. tech platforms such as Google, Meta, and Amazon earn from Canadian users, retroactive to 2022. Analysts estimate it could cost U.S. firms around US $3 billion .
This move dramatically escalates tensions in the U.S.–Canada relationship, which has already been strained by prior U.S. tariffs on steel, aluminum, and automobiles, along with Canada’s retaliatory duties on American agricultural products .
Responding to Trump’s announcement, newly elected Canadian Prime Minister Mark Carney said Ottawa would “continue them [talks] in the best interests of Canadians,” making clear that Canada will not rescind its DST . Industry and trade associations in Canada urged calm, recommending perseverance in negotiations despite the abrupt suspension .
While U.S. Treasury Secretary Scott Bessent recently expressed optimism about concluding multiple bilateral deals by Labor Day, this latest development signals a dramatic shift in tone .
Market reactions were mixed: U.S. stock indexes hit record highs earlier in the day, only to dip following Trump’s announcement, while the Canadian dollar weakened against its American counterpart .
The breakdown in talks adds new uncertainty to the USMCA framework, which governs cross-border trade. With Canada responsible for more than 75 percent of its exports heading to the U.S., both economies now face heightened instability as a tariff showdown looms .
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