WASHINGTON, (Reuters) 鈥 U.S. President Donald Trump yesterday abruptly cut off trade talks with Canada over its tax targeting U.S. technology firms, calling it a 鈥渂latant attack鈥 and saying that he would set a new tariff rate on Canadian goods within the next week.
The move plunges U.S. relations with its second-largest trading partner back into chaos after a period of relative calm.
It also came just hours after Trump鈥檚 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 U.S. manufacturing sector and in other key tariff negotiations.
The often-chaotic rollout of Trump鈥檚 import levies since his return to office this year have frequently whipsawed financial markets, and have begun to weigh on consumer spending, the bedrock of the U.S. economy. U.S. stocks were briefly batted lower by his broadside against Canada, but managed to close out the week at record highs for the S&P 500 and Nasdaq.
Trump鈥檚 action comes ahead of a Canada鈥檚 plans to begin collecting on Monday a longstanding digital services tax on U.S. technology firms including Amazon AMZN.O, Meta META.O, Alphabet鈥檚 Google GOOGL.O and Apple AAPL.O, 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 鈥渁 direct and blatant attack on our country鈥 and said Canada was a 鈥渧ery difficult country to TRADE with.鈥
鈥淏ased on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,鈥 Trump said. 鈥淲e 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.鈥 Canada is the second-largest U.S. trading partner after Mexico, buying $349.4 billion of U.S. goods last year and exporting $412.7 billion to the U.S., according to U.S. Census Bureau data.
Canadian Prime Minister Mark Carney had said on June 16 he and Trump agreed to try to wrap up a new economic and security deal within 30 days.
鈥淭he Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses,鈥 Carney鈥檚 office said in a statement.
Earlier yesterday, Bessent said the Trump administration鈥檚 various trade deals with other countries could be done by the Sept. 1 Labor 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 U.S. strike on Iran鈥檚 nuclear facilities and the massive tax and spending bill in the U.S. Congress, the Trump administration鈥檚 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.
鈥淪o we have countries approaching us with very good deals,鈥 Bessent said on Fox Business Network.
鈥淲e have 18 important trading partners. 鈥 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,鈥 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 has previously said that countries negotiating in good faith could get deals.
But Trump told reporters at the White House that he could extend the tariff deadline or 鈥渕ake it shorter,鈥 adding that within the next week and a half, he would notify countries of their tariff rates.
鈥淚鈥檇 like to just send letters out to everybody: Congratulations. You鈥檙e paying 25%鈥 tariffs.