Canadian Prime Minister Mark Carney (left) said Ottawa will adjust counter tariffs if no deal is reached. Photo / Getty Images
US President Donald Trump on Friday said he is calling off trade negotiations with Canada in retaliation for taxes impacting US tech firms, adding that Ottawa will learn of their new tariff rate within a week.
Trump was referring to Canada’s digital services tax, which was enacted last year and forecast to bring in C$5.9 billion ($7.1b) over five years.
While the measure is not new, US service providers will be “on the hook for a multibillion-dollar payment in Canada” come June 30, noted the Computer & Communications Industry Association recently.
The 3% tax applies to large or multinational companies such as Alphabet, Amazon and Meta that provide digital services to Canadians, and Washington has previously requested dispute settlement talks over the matter.
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump said in a post on his Truth Social platform on Friday.
He called the country “very difficult” to trade with.
Canada may have been spared some of Trump’s most sweeping duties, such as a 10% levy on nearly all US trading partners, but it faces a separate tariff regime.
Trump has also imposed steep levies on imports of steel, aluminium and automobiles.
Last week, Canadian Prime Minister Mark Carney said Ottawa will adjust its 25% counter-tariffs on US steel and aluminium – in response to a doubling of US levies on the metals to 50% – if a bilateral trade deal was not reached in 30 days.
“We will continue to conduct these complex negotiations in the best interest of Canadians,” Carney said on Friday, adding that he had not spoken to Trump following the US President’s announcement.
Trump’s latest salvo targeting Canada came shortly after Washington and Beijing confirmed finalising a framework to move forward on trade.
Beijing said Washington would lift “restrictive measures” while China would “review and approve” items under export controls.
A priority for Washington in talks with Beijing had been ensuring the supply of the rare earths essential for products including electric vehicles, hard drives and national defence equipment.
China, which dominates global production of the elements, began requiring export licences in early April, a move widely viewed as a response to Trump’s blistering tariffs.
The two sides agreed after talks in Geneva in May to temporarily lower steep tit-for-tat duties on each other’s products.
China also committed to easing some non-tariff countermeasures but US officials later accused Beijing of violating the pact and slow-walking export licence approvals for rare earths.
They eventually agreed on a framework to move forward with their Geneva consensus following talks in London this month.
A White House official told AFP on Thursday the Trump administration and China had “agreed to an additional understanding for a framework to implement the Geneva agreement”.
This clarification came after the US President told an event that Washington had inked a deal relating to trade with China, without providing details.
Under the deal, China “will review and approve applications for the export control items that meet the requirements in accordance with the law”, China’s commerce ministry said.
“The US side will correspondingly cancel a series of restrictive measures against China,” it added.
Dozens of economies, although not China, face a July 9 deadline for steeper duties to kick in – rising from a current 10%.
It remains to be seen if other countries facing the higher US tariffs will successfully reach agreements to avoid them before the deadline.
US Treasury Secretary Scott Bessent on Friday said Washington could wrap up its agenda for trade deals by September, indicating more agreements could be concluded, although talks were likely to extend past July.
Speaking to Fox Business, Bessent reiterated there are 18 key partners Washington is focused on pacts with.
“If we can ink 10 or 12 of the important 18, there are another important 20 relationships, then I think we could have trade wrapped up by Labor Day,” Bessent said, referring to the US holiday on September 1.
The White House suggested on Thursday that the July deadline could be extended, or Trump could pick a tariff rate for countries if there was no agreement.
Wall Street’s major indexes, which bounced early on Friday on hopes for deals, lost some ground after Trump called off Canada talks.
- Agence France-Presse