President Donald Trump announced the end of all trade discussions with Canada on June 27, 2025, following the country's decision to implement a digital services tax. Trump condemned the move on social media, stating that the U.S. would introduce tariffs on Canadian goods within the next week in response.

Canada’s digital services tax, which is aimed at tech companies operating in the country, has drawn criticism from both U.S. lawmakers and business groups, who argue it could cost American companies billions. The tax, which applies a 3% levy on digital revenue from Canadian users exceeding C$20 million ($14.6 million), is expected to target companies like Meta Platforms Inc.

Canada’s Response and Market Reactions

In the wake of Trump’s announcement, Canada’s financial markets saw a notable decline, with both the national share index and the currency weakening. Despite the U.S. pressure, Canadian Finance Minister François-Philippe Champagne indicated that the digital tax would proceed as planned, with the first payments due shortly after Trump’s threat.

Prime Minister Mark Carney’s office and Canada’s finance ministry have not provided immediate comments regarding the tariff threat or the ongoing discussions about the digital tax.

G-7 Discussions and Ongoing Negotiations

While the U.S. Treasury Secretary Scott Bessent suggested a pause in digital services taxes for other G-7 nations, including Canada, in exchange for a halt to a proposed U.S. tax on foreign investors, Canada has opted not to follow this path. U.S. lawmakers, particularly a group of 21, urged Trump to pressure Canada into withdrawing the digital tax, forecasting a $2 billion cost to American companies.

Background: U.S.-Canada Trade Tensions

This development is part of broader tensions between the U.S. and Canada, which have included trade negotiations over the past months. The digital services tax has become a flashpoint, with the Trump administration consistently opposing such levies as non-tariff barriers that impede U.S. exports.

Trump’s decision to end trade talks and impose tariffs follows earlier disputes over issues such as fentanyl trafficking and migration, with separate negotiations ongoing with both Canada and Mexico.