President Donald Trump announced today that the United States is immediately terminating all trade talks with Canada and will impose new tariffs on Canadian goods, escalating tensions between the two major trading partners. The move comes in direct response to Canada’s decision to implement a digital services tax (DST) targeting large technology companies, many of which are American.
Digital Services Tax at the Center of Dispute
Canada’s digital services tax, set to take effect this weekend, imposes a 3 percent levy on the Canadian revenue of large digital companies with global revenues exceeding C$20 million. The tax applies to profits from online advertising, social media, digital marketplaces, and the sale or licensing of user data. The Canadian government has justified the measure as a way to ensure that tech giants pay their fair share of taxes on profits generated within Canada.
President Trump, however, has characterized the tax as “a direct and blatant attack on our Country,” arguing that it unfairly targets U.S. technology firms such as Meta (META), Apple (AAPL), Google (GOOG) (GOOGL), Amazon (AMZN), and Microsoft (MSFT). In a statement posted on Truth Social, Trump said, “Due to this outrageous Tax, we are immediately terminating ALL trade discussions with Canada. 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”.
Implications for Trade and Business
The abrupt end to trade negotiations marks a significant setback in U.S.-Canada economic relations. Canada is the United States’ second-largest trading partner, with hundreds of billions of dollars in goods and services exchanged annually. The new tariffs, which are expected to be announced within a week, could impact a wide range of Canadian exports, from manufactured goods to agricultural products, and may trigger retaliatory measures from Ottawa.
The dispute also highlights broader global tensions over the taxation of digital services. The United States has consistently opposed unilateral digital taxes, arguing that they disproportionately affect American companies and should be addressed through multilateral agreements. Trump accused Canada of “copying the European Union,” which has also implemented similar taxes and is currently in discussions with the U.S. over the issue.
Business and Market Reaction
The investing community is closely watching the situation, as new tariffs could disrupt supply chains and increase costs for companies operating across the U.S.-Canada border. Technology firms, in particular, are assessing the potential impact of the Canadian tax and any U.S. retaliatory measures on their North American operations.
While Canadian Prime Minister Mark Carney’s office has not yet commented, officials had previously hoped to reach a new economic and security agreement with the U.S. by mid-July, including the potential lifting of existing tariffs. Those talks are now on hold indefinitely.
Markets reacted harshly to the news. The S&P 500 ($SPX) was up over .5% for the day, but has since pulled back into the red. Investors were likely hoping the ongoing trade war with major U.S. trade partners was coming to an end. This is giving investors reason to doubt this will be coming to an end anytime soon, and could signal more retaliatory tariffs towards Canada in the coming weeks.
As both governments brace for the next phase of the dispute, the outcome will likely influence not only bilateral trade but also the broader debate over how to tax digital commerce in a globalized economy. For now, businesses on both sides of the border face renewed uncertainty as they await details on the forthcoming U.S. tariffs and any potential Canadian response.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
