President Donald Trump made headlines on Friday by announcing the immediate termination of all discussions on trade with Canada. This decision came in response to Canada's move to impose a digital services tax on American tech firms, a move that Trump described as a direct attack on the United States.
In a statement posted on Truth Social, Trump accused Canada of emulating the European Union with the implementation of what he deemed an "egregious" tax. He highlighted the challenges American farmers have faced in trading with Canada, citing tariffs as high as 400% on dairy products over the years. Trump's announcement marked a significant escalation in tensions between the two countries, with the President indicating that tariffs on Canadian businesses would be forthcoming.
The sudden turn of events has thrown a wrench into the longstanding trade relationship between the US and Canada, traditionally close allies and top trading partners. In 2024, goods trade between the two countries amounted to approximately $762 billion, underscoring the economic significance of the bilateral partnership.
Following Trump's declaration, financial markets reacted, with the S&P 500 and the Nasdaq Composite both reversing earlier gains to trade in negative territory. The uncertainty surrounding the future of trade relations between the US and Canada has injected a new element of volatility into the markets.
Canada's digital services tax, which came into effect last year and is retroactively applied to 2022, is slated to start collecting payments on Monday. This tax is set to impact both domestic and foreign tech companies operating in Canada, including major players like Amazon, Google, and Meta. Despite strong opposition from the US, Canadian officials have stood firm in their decision not to suspend the implementation of the tax.
The lack of immediate response from Canadian Prime Minister Mark Carney to Trump's announcement further underscores the tensions between the two nations. The standoff over trade policy highlights the complexities and challenges inherent in managing trade relationships between major global economies.
As the situation continues to evolve, it remains to be seen how both countries will navigate this latest trade dispute and its potential implications for businesses and consumers on both sides of the border. Stay tuned for further updates as this story unfolds.
Please note that this article includes excerpts from a CNBC report and is intended to provide analysis and context on the recent developments in US-Canada trade relations.