Trump halts trade talks with Canada over digital tax, threatens tariffs

New Delhi: US President Donald Trump has suspended trade talks with Canada, citing the country’s refusal to back down on a new 3% digital services tax, calling it “a direct and blatant attack on our country.”

The digital services tax imposed by Canada will impact major tech companies like Amazon, Google, Meta and Uber.

According to a Fortune report, the tax is scheduled to take effect on Monday and will apply retroactively, leaving US firms with a bill of $2 billion due by the end of the month.

Trump responded by calling the tax “egregious” and said all trade discussions with Canada were immediately terminated. He also announced plans to impose new tariffs on Canadian goods within the next seven days.

“Economically, we have such power over Canada. We’d rather not use it,” Trump said in the Oval Office. “It’s not going to work out well for Canada. They were foolish to do it.”

Canadian Prime Minister Mark Carney addressed the matter on Friday, stating that Canada would continue to pursue negotiations constructively. “We’ll continue to conduct these complex negotiations in the best interests of Canadians. It’s a negotiation,” he said.

This latest development adds to Trump’s growing list of trade disputes since the start of his second term. The US has already implemented 50% tariffs on steel and aluminium, 25% tariffs on automobiles, and a general 10% tax on imports from most countries. Canada and Mexico are subject to separate tariffs of up to 25%, initially introduced to curb fentanyl smuggling. Certain products, however, remain protected under the 2020 US-Mexico-Canada Agreement signed during Trump’s first term.

Despite the tensions, Canada remains one of the United States’ key trading partners. Fortune reports that around 60% of US crude oil imports and 85% of electricity imports come from Canada. The country is also the largest foreign supplier of steel, aluminium and uranium to the US, and possesses 34 critical minerals and metals identified as priorities by the Pentagon.

Daniel Béland, a political science professor at McGill University in Montreal, said the issue stems from domestic tax policy but has long been a source of bilateral strain.

“The Digital Services Tax Act was signed into law a year ago, so the advent of this new tax has been known for a long time,” Béland said. “Yet, President Trump waited just before its implementation to create drama over it in the context of ongoing and highly uncertain trade negotiations between the two countries.”