Washington, June 27, 2025 — President Donald Trump announced on Friday that the United States is immediately terminating all trade discussions with Canada, in response to Ottawa’s decision to impose a 3% digital services tax (DST) on American tech giants .
US Reacts Strongly
In a post on Truth Social, Trump denounced Canada’s DST as a “direct and blatant attack on our country,” declaring:
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying … within the next seven day period.”
He described Canada as “a very difficult country to trade with,” citing long-standing U.S. concerns over Canadian dairy tariffs of up to 400% as further evidence.
Market Response
Despite the abrupt announcement, U.S. markets were largely unfazed. The S&P 500 and Nasdaq hit record highs, supported by optimism around potential Federal Reserve rate cuts, a temporary Israel–Iran ceasefire, and enthusiasm for AI-driven companies.
Canada’s Position & Reaction
Canada’s government, led by Prime Minister Mark Carney, affirmed they will continue negotiations in the national interest. Despite the U.S. pause, Carney and Trump are expected to resume talks with a July 21 deadline for reaching a comprehensive deal.
Finance Minister François‑Philippe Champagne also signaled diplomatic flexibility, hinting Canada could revisit the DST as part of broader trade discussions.
Background & Implications
Canada’s DST, enacted in June 2024 and retroactive to January 1, 2022, imposes a 3% levy on revenues from digital services targeting Canadian users, affecting major U.S. platforms like Amazon, Google, Meta, and Uber. Projected to raise about CAN$7 billion over five years, it represents a sharper move than most OECD-aligned digital levies .
Trump’s aggressive response follows earlier U.S. tariffs on Canadian steel, aluminum, auto parts, and energy products. This marks a continued escalation of what analysts call the 2025 U.S.–Canada trade war, first triggered by broad tariffs in February and March .
Background & Implications
Canada’s DST, enacted in June 2024 and retroactive to January 1, 2022, imposes a 3% levy on revenues from digital services targeting Canadian users, affecting major U.S. platforms like Amazon, Google, Meta, and Uber. Projected to raise about CAN$7 billion over five years, it represents a sharper move than most OECD-aligned digital levies .
Trump’s aggressive response follows earlier U.S. tariffs on Canadian steel, aluminum, auto parts, and energy products. This marks a continued escalation of what analysts call the 2025 U.S.–Canada trade war, first triggered by broad tariffs in February and March .
Bottom Line
President Trump’s abrupt halt to trade talks underscores escalating U.S. dissatisfaction with Canada’s digital tax policy. With both nations bracing for potential tariffs and a tight negotiation timeline ahead, the dispute risks spilling over into wider economic and political tensions. Canada now faces a stark choice: defend its tax sovereignty or rescind the DST to restore trade dialogue with its largest trading partner.
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