U.S. President Donald Trump said he would “immediately” negotiate deals with Canada as the country hopes to start implementing tax policies for large tech companies.
His latest move announced on social media is because neighbors have been agreeing to a trade deal in mid-July.
After Trump sparked a trade war earlier this year, the two countries imposed tariffs on each other’s goods and threatened to use “economic power” to annex Canada.
On Friday, the U.S. president said he would end talks due to his “severe taxes” on tech companies, adding that he would announce tariffs on goods across the border next week.
“We hereby terminate all discussions on trade with Canada and will take effect immediately,” he wrote on social media.
“We will let Canada know the tariffs that they will do business with the United States of America over the next seven days.”
Prime Minister Mark Carney suggested in a brief comment to reporters that the talks would continue.
“We will continue to engage in these complex negotiations in the best interests of Canadians,” he said.
Canada’s 3% digital service tax has been a key point in its relationship with the United States since the law was enacted last year. The first payment will expire on Monday.
Business groups estimate that over $20 billion in U.S. companies will cause losses to U.S. companies such as Amazon, Apple and Google.
Canadian officials have said they hope to resolve the issue as part of trade talks with the United States.
It is hoped that the relatively warm relationship that newly elected Carney has established with Trump may help these negotiations.
The president’s latest move has skeptical of future deals, although Trump often uses social media threats to try to gain leverage in negotiations or speed up negotiations he believes are stalled.
For example, last month he threatened to raise tariffs on goods reaching the U.S. coast from the EU, just to climb A few days later.
Candace Laing, CEO of the Canadian Chamber of Commerce who criticized the digital service tax, said that with the transaction deadline, “the last-minute surprise should be expected.”
“The tone and tenor of negotiations have improved in recent months and we hope to continue to improve,” she added.
During Trump’s first semester, the White House fought a tough battle as many countries began to consider taxing digital services.
But INU Malak, a trade policy researcher at the Council on Foreign Relations, noted that the issue was not resolved in a trade agreement reached by the United States and the United Kingdom earlier this year, indicating some flexibility.
She said Trump’s threat seemed to be a move to increase pressure from his typical negotiation “a move to increase pressure from the script – but it is also a sign that the president refocused on Canada, which could open the way for a deal.
“It does provide some openness – maybe not what Prime Minister Carney wants…but it does provide them with some room to speed up those conversations,” she said.
The United States is Canada’s top trading partner, buying more than $40 billion in goods under a long-term free trade agreement last year.
But Trump reached trade earlier this year with a 25% tariff, citing concerns about drug trafficking at the border.
New U.S. tariffs on automobiles, steel and aluminum have also joined the relationship. For example, auto parts crossed our, Mexico and Canada borders many times before they were fully assembled out of the vehicle, and this import tax threatens the supply chain.
Trump then faced widespread alerts from businesses in the United States and Canada, and exempted certain commodities, which hit the tariffs on certain U.S. products.
U.S. stocks collapsed on Friday after Trump said he was cutting off talks, but later shut down the S&P 500 bounce at record highs.
