President of the United States, Donald Trump, has declared that he will no longer continue trade negotiations with Canada, effective immediately. This decision comes as Canada prepares to implement a new tax policy targeting major tech companies.
The announcement was made on social media, and comes after the two neighboring nations had been working towards a trade agreement to be finalized by mid-July.
Following Trump’s initiation of a trade war and his threats to forcibly annex Canada using economic means earlier this year, both countries have imposed tariffs on each other’s goods.
Trump stated on Friday that he is ending discussions due to what he considers to be an unjust tax on tech companies, and that he will announce new tariffs on goods crossing the border within the next week.
He wrote on social media, “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.”
Canada’s 3% digital services tax, which was implemented last year, has been a point of contention in their relationship with the US. The first payments are due on Monday.
The Canadian finance minister, whose office has confirmed that the country will proceed with the tax, did not immediately respond to requests for comment from the BBC.
Business groups estimate that this tax will cost American companies over $2 billion annually.
Canadian officials have previously stated that they expected to address this issue during trade negotiations with the US.
There were hopes that the newly-elected Prime Minister of Canada, Mark Carney, would be able to use his positive relationship with Trump to aid in these negotiations.
However, this latest move by the president raises doubts about the possibility of a future trade deal. Trump has a history of using social media threats to gain leverage in negotiations or speed up stalled discussions.
For example, last month he threatened to increase tariffs on goods from the European Union, only to backtrack a few days later.
The US is Canada’s primary trading partner, with over $400 billion in goods being purchased last year under a longstanding free trade agreement.
However, earlier this year, Trump imposed a new 25% tariff on this trade, citing concerns about drug trafficking at the border.
Relations have also been strained by new US tariffs on cars, steel, and aluminum. These tariffs have disrupted supply chains, as car parts often cross borders between the US, Mexico, and Canada multiple times before a vehicle is fully assembled.
Trump later granted exemptions for certain goods in response to widespread concern from businesses in both countries. In retaliation, Canada has imposed tariffs on some US products.
Following Trump’s declaration that he is ending trade talks, stock prices in the US fell on Friday.