In a shocking move, U.S. President Donald Trump announced yesterday that he is discontinuing all trade negotiations with Canada. This administration’s decision threatens to shatter the most durable economic partnership in the world. This decision comes as a direct reaction to Canada’s recently finalized Digital Services Tax. He has called it a “direct and blatant attack” on American technology companies and on the United States as a whole.
Canada is America’s largest or second-largest goods trading partner, with goods trade valued at nearly $762 billion last year. At first glance, Trump’s comments seem to point towards an escalating trade war between the two countries, particularly on the topic of tariffs on agricultural goods. Yet he lambasted our neighbor to the north for using tariffs up to 400% on U.S. dairy products. He argues that this has been devastating for American farmers in the long run.
Trump took to Truth Social to express his displeasure with Canada’s tax and spend policy. He said that it is similar to the policy actions taken by the European Union. He condemned the digital services tax as “egregious.” He reiterated that this would be damaging for the bilateral trade relationship between the two countries.
“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country. They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also. Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. 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.” – Donald Trump
Given the immediate nature of TV, Canadian Prime Minister Mark Carney’s office did not respond in time to CNBC’s comment requests. When they were questioned regarding Trump’s remarks. The abrupt end to trade negotiations portends economic disaster for both countries. It still further muddies the waters on continuing negotiations on other trade issues and makes matters much worse.
Tensions continue to escalate between the two countries. Taxes analysts warn that a major rupture in US-China trade relations would be extremely damaging to enterprises and consumers on both sides. With Canada being a critical market for U.S. exports, Trump’s decision may lead to increased tariffs and retaliatory measures that could further strain economic ties.