Donald Trump says he's cutting off trade talks with Canada over Ottawa's digital tax

Hamilton Spectator

3 hours ago

OTTAWA — U.S. President Donald Trump said Friday that he is cutting off all trade talks with Canada over the federal government's digital services tax that would impact American tech giants, calling it a 'blatant attack' on the United States.
Trump announced his plan to end trade talks in a social media post Friday afternoon, less than two weeks after he agreed with Prime Minister Mark Carney at the G7 summit on June 16 to work toward a deal to end the ongoing trade war
within 30 days
.
'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,' Trump's
post
said.
'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.'
The Prime Minister's Office responded later Friday afternoon with a short statement that did not mention the digital services tax and expressed Canada's desire to continue the trade talks.
'The Canadian government will continue to engage in these complex negotiations with the United States in the best interest of Canadian workers and businesses,' the statement said.
Finance Minister François-Philippe Champagne said as recently as two weeks ago that Ottawa would press ahead with the tax, which is set to start collecting money on Monday.
Prime Minister Mark Carney comments moments after U.S. President Donald Trump said that he was "terminating all discussions on trade with Canada" and threatened new tariffs over Ottawa's plans to push ahead with a digital services tax. Carney called the negotiations "complex." (June 27, 2025 / The Canadian Press)
On social media, Conservative Leader Pierre Poilievre said he was disappointed to hear that trade talks have halted, and that he hopes they resume quickly. He also did not name the digital services tax, but pointed to changes his party has long argued will improve the Canadian economy, including the repeal of the existing federal project assessment regime and industrial carbon pricing.
'As always, Conservatives are ready to help get a good deal for Canada,' Poilievre's
statement
said. 'We must put Canada first.'
Under Trump, the U.S. has imposed a series of tariffs on Canadian steel, aluminum, autos and other goods that Canada views as illegal and unjustified. Ottawa has responded with a raft of counter-tariffs in a trade war that Carney vowed during the spring campaign to 'win.'
The prime minister has since embarked on talks with Trump, which Carney said are designed to renegotiate Canada's trade and security relationship with the economic and military juggernaut to the south.
Flavio Volpe, president of the Automotive Parts Manufacturers' Association, was part of the prime minister's Canada-U.S. council that met virtually on Friday, just as Trump declared he would terminate trade talks. In an interview with the Star, Volpe said he remains cautiously optimistic, and that surprising twists have become an expectation since Trump returned to the White House in January.
'Is this a pressure moment in a negotiation, or is it really the end of the conversation? I don't know. But you know who does know? Donald Trump, who is, in this style of negotiation, a master,' Volpe said.
'Because the prime minister and the president are in direct communication, and have been for the last couple months, I will save my panic for … if the PM suggests we should panic.'
Brian Clow, a former deputy chief of staff and senior adviser to prime minister Justin Trudeau, told the Star that it's not surprising Trump would target the tax, which was a trade irritant when Joe Biden was president as well. He urged the Carney government to stay calm and keep trying to talk to its American counterparts. He also said the government should not consider dropping the digital services tax unless the move is part of a broader trade deal with the Trump administration.
'To a certain extent, what we just saw from Donald Trump is exactly from his playbook. We've seen it so many times before,' Clow said. 'This is how he negotiates. He negotiates by threat, attempting to intimidate to yield more concessions from Canada. This is just a part of how it works and they've got to keep talking and hopefully come to some sort of deal.'
The trade war has rattled businesses and workers across the country, with
layoffs
at auto plants and steel factory
shutdowns
in recent weeks. Trump doubled his steel and aluminum tariffs to 50 per cent against Canada on June 4, arguing the tariffs are needed to protect and promote a key American industry, as his broader policy of tariffs is designed to raise government revenues and overcome what the U.S. president argues is unfair commercial relations for his country.
The Liberal government has long planned to impose a tax on digital services, which Trump
views
as an unfair trade practice that will hit American companies like Google and Meta. In his social media post Friday, Trump alluded to how the European Union is planning a similar digital services tax, and said Canada was 'copying' the bloc of states with 'a direct and blatant attack on our Country.'
On Thursday, U.S. Treasury Secretary Scott Bessent
announced
that the G7 — a group of rich democracies that includes Canada — agreed to exempt American companies from certain taxes. In return, the Trump administration would remove a so-called 'revenge tax' from a sweeping bill in the U.S. Congress, which would have imposed taxes on investments from countries the U.S. deemed to be treating American firms unfairly.
President Donald Trump said he's immediately suspending trade talks with Canada over its plans to continue with its tax on technology firms. Trump said the Canadians was sticking to its plan to impose the tax set to take effect Monday. (AP Video / June 27, 2025)
Neither the PMO nor Champagne's office responded Friday when asked if that deal impacted Canada's digital services tax.
The policy, enacted in 2024's
Digital Services Tax Act
, imposed a three per cent tax on revenue earned from online marketing and advertising, social media and some sales of user data. The tax
applies
to domestic and foreign businesses that reap more than $1.1 billion in global revenue and earn more than $20 million of revenue within Canada in a given year. The Liberals promised to introduce the tax in 2019, and argued hiking tax on big companies could help pay for social services and other public investments to spur the economy.
The independent Parliamentary Budget Officer reported in 2023 that the tax would raise about $1.2 billion per year in government revenues.
In a written statement Friday, the head of the Business Council of Canada said it has warned the government for the past three years that the digital services tax 'could risk undermining' Canada's economic relationship with the U.S.
Goldy Hyder called on Canada to immediately propose to eliminate the tax, in exchange for the removal of American tariffs on Canadian goods.
Catherine Cobden, president and chief executive officer of the Canadian Steel Producers Association, said Friday that trade relations are so unpredictable and uncertain with the U.S. that even a new deal to remove current tariffs can no longer be seen as a guarantee. She called for stronger measures to encourage using domestically produced steel in Canada, and other steps to protect the sector.
'We are really under attack by the United States, so we are rapidly pivoting away from that market,' she said.
Another business group that has opposed the digital services tax, the Canadian Chamber of Commerce, said Friday that 'surprises' should be expected in negotiations.
'The tone and tenor of talks has improved in recent months, and we hope to see progress continue,' said the chamber's president, Candace Laing. 'We respect that Team Canada is conducting these negotiations at the table, and we need to give them the space to navigate.'