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U.S. President Donald Trump abruptly ended trade talks with Canada on Friday in response to Canada’s digital services tax targeting major U.S. technology firms. Trump called the tax “a direct and blatant attack” and announced that the U.S. would impose new tariffs on Canadian goods within a week. This decision disrupted recent optimism following a cordial G7 meeting where Trump and Canadian Prime Minister Mark Carney agreed to finalize a new trade deal within 30 days.
The digital services tax, which takes effect Monday, applies a 3 percent levy on revenue generated from Canadian users by companies like Amazon, Meta, Google, and Apple, retroactive to 2022. Trump said talks with Canada would not resume until Ottawa changes its stance, asserting that the U.S. holds significant leverage.
Despite brief market jitters, U.S. stock indices ended the week at record highs. Canada is America’s second largest trading partner, with two-way trade exceeding 760 billion dollars last year. In response to Trump’s decision, Carney’s office emphasized a commitment to ongoing dialogue in Canada’s best interest.
U.S. Treasury Secretary Scott Bessent attempted to downplay the conflict, suggesting the U.S. may pursue a Section 301 investigation to justify retaliatory tariffs equal to the estimated 2 billion dollars in harm to U.S. firms. The U.S. has used similar measures against European nations with digital taxes.
Bessent also said the U.S. hopes to conclude multiple trade deals by Labor Day. Talks are ongoing with 18 partners, including revisions to an agreement with China, which will resume exports of rare earth minerals and magnets crucial to U.S. industries. Negotiations also continue with the European Union, India, and Japan. Trump hinted that tariff deadlines may be adjusted and signaled that new rates, potentially up to 25 percent, would be announced soon.
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