Trump Ends Talks With Canada, Tariff Retaliation Looms Over Tech Tax

Tensions escalated just days before Canada’s scheduled implementation of a 3 per cent digital services tax on large US tech firms such as Amazon, Meta, Google and Apple.

The fallout marks a sharp reversal in US-Canada ties, which had recently seen progress, including a cordial G7 summit where Trump and Canadian Prime Minister Mark Carney pledged to finalise a new trade framework within 30 days.

Source : PTI

US President Donald Trump has abruptly ended ongoing trade discussions with Canada, citing a new digital services tax imposed on American technology companies as the primary reason.

Describing the levy as a "blatant attack" on the United States, Trump announced plans to unveil new tariff rates on Canadian goods within a week, reported Reuters.

The fallout marks a sharp reversal in US-Canada ties, which had recently seen progress, including a cordial G7 summit where Trump and Canadian Prime Minister Mark Carney pledged to finalise a new trade framework within 30 days.

However, tensions escalated just days before Canada’s scheduled implementation of a 3 per cent digital services tax on large US tech firms—such as Amazon, Meta, Google and Apple—applied retroactively from 2022 to firms earning over $20 million annually from Canadian users.

On his Truth Social platform, Trump stated: “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 to do business with the United States of America within the next seven-day period.” Speaking at the White House, he added that talks would not resume “until they straighten out their act,” while also asserting, “We hold such power over Canada.”

In an effort to downplay the rupture, US Treasury Secretary Scott Bessent noted that US Trade Representative Jamieson Greer may open a Section 301 probe into Canada’s tax, potentially paving the way for retaliatory tariffs to recover an estimated $2 billion in damages to US firms.

Canada, the US’s second-largest trading partner and top buyer of American goods, responded with caution. Prime Minister Carney’s office said the Canadian government would “continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses.”

Despite the uncertainty, Bessent struck a more optimistic tone regarding broader trade efforts. On Friday, he indicated that the administration was progressing in talks with 18 countries and expressed confidence that a significant number of deals could be concluded by the Labour Day holiday in early September.

Broader Trade Push Continues as US-China Tensions Ease

While the spat with Canada dominated headlines, the administration also reported positive momentum on other trade fronts. Discussions with China have led to the resolution of critical issues regarding the shipment of rare earth minerals and magnets, which are essential to US industries, including defence, automotive, and technology.

China had previously halted exports in response to American tariffs, disrupting global supply chains. However, under terms agreed in Geneva this May, Beijing committed to resuming shipments. Bessent confirmed that flows of these essential materials will now proceed as intended. “I am confident now that ... as agreed, the magnets will flow,” he said.

The US also agreed to resume shipments of materials previously withheld from China once rare earth exports are reinstated. China’s Commerce Ministry confirmed that both countries had settled implementation details but did not explicitly mention rare earths.

More Trade Talks Underway With Japan, India, EU

In parallel, US officials engaged in advanced negotiations with Japan and India. The Japanese government noted continued dialogue aimed at achieving a mutually beneficial agreement. Meanwhile, the United States sent a revised trade proposal to the European Union on Thursday, as the administration pushes to meet a July 9 deadline for new deals or risk higher tariffs.

Trump hinted at possible flexibility around that date, saying he could extend or shorten the deadline depending on the outcome of talks. “I’d like to just send letters out to everybody: Congratulations. You’re paying 25 per cent,” he said at the White House, suggesting imminent announcements on new tariff rates.