Trade conflicts have erupted again! Trump angrily criticizes Canada's digital tax policy and announces the suspension of US-Canada trade negotiations.

The trade relationship between the U.S. and Canada has suddenly revealed significant cracks. U.S. President Trump issued a statement on the social platform Truth Social on Friday, angrily denouncing Canada’s decision to impose a digital services tax on American tech companies, and announced the "immediate termination of all trade negotiations with Canada." This unexpected decision could severely impact the bilateral trade relationship worth up to $762 billion.

Trump posts to criticize Canada: learning bad examples from the EU

Trump's post on Truth Social was strongly worded, accusing the Canadian government of "blatantly copying the EU" by imposing a "shocking" digital services tax on American tech giants. He stated that this is a "direct attack" on the United States and referred to Canada's long-standing imposition of dairy tariffs as high as 400% on American farmers, and now targeting the tech industry, as "intolerable."

"Canada made a stupid move" Trump threatens retaliatory tariffs

Trump further stated that the U.S. will announce the amount of retaliatory tariffs Canada needs to pay within seven days, adding, "We have tremendous control over Canada." In an interview in the Oval Office, he bluntly said, "They are so stupid to impose this tax, we will immediately stop all negotiations with Canada until they come to their senses."

The Prime Minister's Office of Canada has not yet responded.

The office of Canadian Prime Minister Mark Carney has yet to respond to this sudden declaration. The latest escalation of this trade dispute has raised concerns about Canada's future role in the G7 and the United States-Mexico-Canada Agreement (USMCA).

The controversy over the digital services tax originated, and American companies became direct victims.

The Canadian government passed the Digital Services Tax (DST) last year, taxing technology companies that profit in Canada, with revenue retroactive to 2022. This tax has a wide scope and directly affects American tech giants such as Amazon, Google, and Facebook's parent company Meta.

Although Washington has repeatedly requested Canada to postpone the collection, Canada insisted on implementing it this month. The first tax is expected to officially be levied on Monday (July 1).

U.S. Treasury Secretary criticizes Canada's tax policy as "clearly unfair"

U.S. Treasury Secretary Scott Bessent stated in an interview on Friday that the Trump administration had hoped Canada would suspend its digital tax policy out of goodwill. He criticized, "We clearly believe that retroactive taxation is extremely unfair."

He also revealed that U.S. Trade Representative Jamieson Greer will initiate an investigation into the imposition of a digital services tax on Canada under Section 301 of the Trade Act of 1974 to assess the potential harm that this tax could cause to the U.S. economy.

U.S. stocks impacted, market turns from red to black.

After Trump issued a statement, the U.S. stock market reacted immediately. The S&P 500 index and the Nasdaq Composite index both turned from a previously set record high to a decline, indicating that the market is concerned about the escalation of tensions in U.S.-Canada trade relations, especially affecting technology stocks.

The scale of bilateral trade is enormous, and conflicts may trigger an even greater storm.

According to data from the Office of the United States Trade Representative, the total goods trade between the United States and Canada in 2024 is approximately $762 billion, making Canada the United States' second-largest trading partner. If Trump's policies are implemented and further retaliatory tariffs are imposed, it could severely impact the North American supply chain and the economic stability of both countries.

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