Trump cuts off US trade talks with Canada
US President Donald Trump abruptly cut off trade talks with Canada on Friday over its tax targeting US technology firms, saying that it was a 'blatant attack' and that he would set a new tariff rate on Canadian goods within the next week.
The move plunges US-Canada relations back into chaos after a period of relative calm that included a cordial G7 meeting in mid-June where Trump and Canadian Prime Minister Mark Carney agreed to wrap up a new economic agreement within 30 days.
It also came just hours after US Treasury Secretary Scott Bessent struck an upbeat tone on trade, touting progress had been made with China on reviving the flow of critical minerals for the US manufacturing sector and in other key tariff negotiations.
The often-chaotic rollout of Trump's import levies since his return to office this year has frequently whipsawed financial markets, and have begun to weigh on consumer spending, the bedrock of the US economy.
US stocks were briefly batted lower by his broadside against Canada, but the S&P 500 and Nasdaq managed to close out the week at record highs.
Trump's action comes ahead of Canada's plans to begin collecting on Monday a previously enacted digital services tax on US technology firms, including Amazon, Meta, Alphabet's Google and Apple, among others.
The tax is 3% of the digital services revenue a firm takes in from Canadian users above $20 million in a calendar year, and payments will be retroactive to 2022.
Trump, in a post on his Truth Social media platform, called the tax 'a direct and blatant attack on our country' and said Canada was a 'very difficult country to TRADE with.'
'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,' Trump 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.'
Speaking to reporters at the White House, Trump said that the negotiations with Canada would not resume 'until they straighten out their act,' adding that the US holds 'such power over Canada.'
Canada is the second-largest US trading partner after Mexico, and the largest buyer of U.S exports. It bought $349.4 billion of US goods last year and exported $412.7 billion to the US, according to US Census Bureau data.
Carney's office responded to Trump's announcement by saying: 'The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses.'
Bessent sought to downplay the U.S.-Canadian dispute in a CNBC interview, saying US Trade Representative Jamieson Greer would likely open a Section 301 probe into Canada's digital tax that would clear the way for tariff retaliation in the amount of harm to US firms, which he said was roughly $2 billion.
The US has prepared similar retaliation against European countries that have imposed digital taxes. A USTR spokesperson did not immediately respond to a request for comment.
'WRAPPED UP BY labour DAY'
Earlier on Friday, Bessent said the Trump administration's various trade deals with other countries could be done by the Sept. 1 labour Day holiday, citing talks with 18 top trade partners and another revision to a deal with China to reopen the flow of rare earth minerals and magnets.
After a week where tariffs took a back seat to the US strike on Iran's nuclear facilities and the massive tax and spending bill in the US Congress, the Trump administration's trade negotiations have picked up.
The United States sent a new proposal to the European Union on Thursday and India sent a delegation to Washington for more talks.
'So we have countries approaching us with very good deals,' Bessent said on Fox Business Network.
'We have 18 important trading partners.... 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 labour Day,' Bessent said.
He did not mention any changes to a July 9 deadline for countries to reach deals with the United States or see tariffs spike higher, but Trump said at the White House that he could extend the tariff deadline or 'make it shorter.'
Trump said that he would notify countries of their tariff rates within the next week and a half, adding: 'I'd like to just send letters out to everybody: Congratulations. You're paying 25%.'
Reuters
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