In a dramatic turn, former President Donald Trump announced the immediate termination of all U.S. trade negotiations with Canada, citing Ottawa’s decision to impose a 3% Digital Services Tax (DST) on large American tech companies. The tax, retroactive to 2022, targets firms like Google, Meta, and Amazon—prompting Trump to accuse Canada of “targeting American innovation” and promise swift retaliatory tariffs on Canadian exports.
The move comes despite recent optimism following the G7 summit, where both nations signaled progress toward a broader economic deal. Trump’s decision has upended those prospects, rekindling fears of a renewed tariff war similar to the one that strained U.S.-Canada ties during his first term. He also referenced existing tariffs on Canadian steel, aluminum, and dairy as justification for potentially expanding economic penalties.
Canadian Prime Minister Mark Carney responded with measured firmness, reiterating Canada’s right to tax digital revenues and pledging to defend the nation’s interests. While Carney expressed disappointment, he maintained that Canada remains open to future talks and refuses to back down under pressure from Washington.
The fallout could have significant consequences for both economies, which share nearly $760 billion in annual trade. Markets reacted with brief volatility, though U.S. indices remained relatively stable. However, with Trump signaling more aggressive trade posturing ahead of the 2026 election, businesses and policymakers on both sides of the border are bracing for an uncertain economic chapter.
