After the daily headlines of more tariffs and more uncertainty seemingly disappeared over the past few weeks, just like that tariffs are back in the news. Specifically, U.S. President Donald Trump has re-ignited the topic by announcing that trade talks with Canada have abruptly been suspended due to a dispute over a digital technology tax.
What happened?
Canada informed the U.S. that it was planned on keeping place a tax aimed at U.S. technology companies who do business in Canada. The so-called “digital services tax” will assess a 3% tax on companies who target Canadian internet users. It will affect larger technology companies such as Google, Meta, and Amazon, the hardest, if enacted.
President Donald Trump had aimed to get the U.S.’s northerly neighbor to reduce or eliminate the tax – something Canada let the U.S. know was not going to happen. The tax is scheduled to go into effect Monday, June 30th.
When the news hit of Canada’s decision, Trump posted on his Truth Social channel that “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.”
Mixed signals on trade talks and tariffs in general leave countries and investors uncertain again.
The news about U.S.-Canada trade talks comes just hours after one of Trump’s top advisors, U.S. Treasury Secretary Scott Bessent said the July 9th deadline to strike trade deals or face more tariffs could be extended to Labor Day. He also left the door open to further extensions as the U.S. and its counterparts seek to strike deals that are fair to all parties involved.
Back in April, as markets roiled and crashed, President Trump had announced that the U.S. would roll back the implementation of many tariffs until the self-imposed July 9th deadline. Markets breathed a sigh of relief and bounced back. There had been few public developments since then, although the Trump administration has tried to portray confidence that deals would be reached with all countries in question.
U.S.-Canada trade talks had focused on actions to reduce reciprocal tariffs.
The trade talks between Canada and the U.S. had a simple goal: prevent further escalation in economic countermeasures by each country, and ultimately, level the playing field for both countries. Trump had reached a similar consensus with the U.S.’s southern neighbor, Mexico, although not much progress has been reported on that front either.
There is still a chance that talks resume, even as soon as this weekend ahead of the July 9th deadline.
