US President Donald Trump suddenly halted ongoing trade talks with Canada, citing the country’s digital services tax on US tech giants.

He referred to this action as “a direct and blatant attack on our country” and promised to impose new tariffs on Canadian products within the week.

This announcement reverses the recently cooperative atmosphere between the two nations, especially after the G7 summit in mid-June, where Trump and Canadian Prime Minister Mark Carney had agreed to finalize a new economic agreement in 30 days.

Canada’s digital services tax, which is set to take effect on Monday, targets major tech companies such as Amazon, Meta, Google, and Apple.

The tax imposes a three percent charge on digital services revenue derived from Canadian users that exceeds $20 million annually, and it will be applied retroactively from 2022.

Although US stocks saw a slight decline after Trump’s announcement, the S&P 500 and Nasdaq still finished the week at all-time highs. However, the president’s erratic tariff choices have unsettled financial markets throughout the year and are beginning to influence consumer spending.

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US Treasury Secretary Scott Bessent, who had earlier on Friday communicated a positive outlook regarding progress on multiple trade fronts, downplayed the dispute with Canada. In an interview with CNBC, he stated that US Trade Representative Jamieson Greer would likely initiate a Section 301 investigation into the Canadian tax, which would allow for proportional tariff retaliation estimated at $2 billion.

The US has previously prepared similar actions against European nations with digital taxes.

 

Despite the conflict with Canada, Bessent pointed out advancements in other areas. He indicated that the administration aims to finalize trade agreements with up to 12 out of 18 key partners by Labor Day, Sept. 1.

Bessent also confirmed that the US and China had settled disagreements regarding the export of rare earth minerals and magnets. These essential materials, crucial for sectors such as defense and electronics, had been restricted by China as part of its retaliation against US tariffs.

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Meanwhile, trade discussions with India and Japan also progressed. Japan’s government issued a statement highlighting that both parties are working towards an agreement that is beneficial for both Japan and the United States.