President says US will announce Canada tariff within seven days, marking unexpected trade war escalation
US president Donald Trump said on Friday he was ending negotiations with Canada over a trade deal, inflaming the tariff dispute just hours after data showed the Canadian economy is continuing to slow.
The president revealed in a Truth Social post that the US was “hereby terminating all discussions on trade with Canada, effective immediately” in response to a digital services tax on American technology companies, which he described as a “direct and blatant” attack on the US.
Trump signalled he would announce a tariff on Canadian companies exporting to the US within the next seven days, although it’s unclear whether he intends to introduce new levies on top of the current charges on general imports and energy, steel, and aluminum.
The president’s announcement arrived hours after new figures released by Statistics Canada showed the economy contracted marginally in April as the trade war sparked the biggest decline in the manufacturing sector since 2021.
The economy is still performing better than the worst of two potential scenarios outlined by the Bank of Canada in April, although analysts viewed trade talk progress as essential to the hopes of averting a further contraction in the second half of the year.
The Canadian government is set to begin collecting the first payments of the digital services tax, equivalent to 3% of the digital services revenue that a firm makes from Canadian users above $20 million each year, on Monday. Other countries including the UK have implemented a similar measure.
Trump and Canadian prime minister Mark Carney indicated earlier this month that they intended to reach an agreement by July 21, strengthening hopes that the trade war launched by the US president shortly after taking office in January could be nearing an end.
That tariff wave raised fears that the Canadian economy could be on course for a sharp correction, with economists highlighting the prospect of mass layoffs as a result of US charges on Canadian imports.
The Canadian government had not responded to Trump's announcement at time of writing.
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