President Trump shuts down trade talks with Canada, tariff announcement coming in 7 days: The story escalated quickly on Friday when President Donald J. Trump announced the termination of all trade talks with Canada, calling it a “very difficult Country to TRADE with.” The move comes after Canada officially passed its Digital Services Tax (DST) into law, aimed at American tech giants operating in its digital space.

Trump made the announcement via Truth Social at 1:44 PM EST on June 27, 2025, warning that a new U.S. tariff on Canadian imports will be finalized and announced within 7 days, by July 4, 2025.

What triggered Trump’s decision to cut off trade talks with Canada?

The immediate flashpoint was Canada’s implementation of a 3% Digital Services Tax. This new tax applies to companies that earn:

• More than €750 million (approx. USD $802 million) in global revenue, and
  
  
• At least CAD $20 million (approx. USD $14.6 million) annually in Canadian digital services revenue.
  
  

This tax is retroactively effective from January 1, 2022, meaning companies could owe three years' worth of back payments. It primarily targets U.S.-based tech giants, including:

• Alphabet (Google) – $307 billion in global revenue (2024)
  
  
• Meta Platforms (Facebook, Instagram) – $134 billion in global revenue (2024)
  
  
• Amazon – $575 billion in global revenue (2024)
  
  
• Uber Technologies – $38 billion in global revenue (2024)
  
  

Canada’s DST closely resembles similar laws in the European Union, which have been a long-standing source of trade tension with the U.S.


In response, Trump called the move “a direct and blatant attack on our Country,” and claimed it mirrors the EU’s tax structure, which is also under dispute with the United States.

What other trade grievances does Trump have with Canada?

Beyond the digital tax, Trump revisited a long-standing economic complaint—Canada’s dairy tariffs. According to the Trump administration:

• Canadian tariffs on U.S. milk, cheese, and other dairy products have reached up to 400% under Canada’s supply management system.
  
  
• The U.S. dairy industry exported over $7.8 billion globally in 2024, but sales to Canada have remained flat due to high barriers.
  
  
• In contrast, Canada exported $453 million in dairy to the U.S. in 2024 under favorable access through the USMCA (United States-Mexico-Canada Agreement).
  
  

Trump claims this imbalance has cost American farmers millions in potential revenue each year.

He also referenced prior grievances dating back to his 2018–2020 trade wars, when tariffs were imposed on Canadian steel (25%) and aluminum (10%), leading to significant retaliation from Ottawa.

What happens next: Will Trump impose tariffs on Canadian goods?

According to Trump’s Truth Social post:

“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.”

No tariff details were released yet, but based on past patterns, the following Canadian sectors are at risk:


In total, Canada exported $397 billion worth of goods to the U.S. in 2024, accounting for over 75% of its total exports. Any significant U.S. tariff could hit the Canadian economy hard, potentially triggering a GDP contraction of up to 1.1%, according to a March 2025 report by the Bank of Canada.

How are markets and politicians reacting to the trade freeze?

Financial markets responded with caution:

• The Canadian dollar dropped 0.7% against the U.S. dollar on June 27 after Trump’s announcement.
  
  
• U.S. tech stocks slid:
  
  
  • Meta (META) fell 1.9%
    
    
  • Alphabet (GOOGL) dropped 2.1%
    
    
  • Amazon (AMZN) declined 1.5%
    
    
• The S&P 500 closed down 0.3%, led by tech losses.
  
  

On the political front, Canadian Prime Minister Mark Carney has yet to respond publicly. However, Chrystia Freeland, Canada’s Deputy PM and Finance Minister, defended the tax earlier this week, saying:

“The digital economy has grown rapidly. It's only fair that companies profiting off Canadian users also pay a fair share of taxes here.”

Back in Washington, U.S. Chamber of Commerce and Business Roundtable groups warned that escalating trade tensions could hurt American consumers by increasing costs for imported goods.

Is this the beginning of another North American trade war?

The decision to cut off trade talks mirrors Trump’s 2018–2019 approach, where aggressive tariffs were used to pressure allies and adversaries alike. The difference now is the focus on digital services, not just traditional manufacturing.

Analysts say this could trigger:

• New Canadian countermeasures on U.S. tech, agriculture, or energy exports.
  
  
• Legal disputes under USMCA's dispute settlement mechanism.
  
  
• Slowdown in cross-border investment, which reached $972 billion in 2024 between the two countries.
  
  

Trump’s administration is expected to release a formal tariff list by July 4, 2025—possibly on the symbolic day of American independence. Trade policy experts suggest tariffs could range from 10% to 35%, depending on the sector.

If Canada retaliates, North America could see a repeat of the 2018–2020 trade war, which resulted in:

• Over $30 billion in retaliatory tariffs
  
  
• A $6.6 billion loss for U.S. farmers
  
  
• Temporary shutdowns of auto plants in Ontario and Michigan
  
  

What’s at stake in Trump vs Carney?

This isn’t just a spat over taxes. It’s a broader fight over how global tech profits are taxed, and who controls the digital economy. Trump’s move to shut down talks sends a clear signal that the U.S. is prepared to act unilaterally—even against close allies.

With billions of dollars and political capital at stake, the next week will be critical. The world is watching how Prime Minister Carney responds and whether Trump follows through with hard tariffs.

Until then, business leaders, investors, and everyday workers on both sides of the border are bracing for what could become the biggest U.S.–Canada trade dispute of the decade.

FAQs:

Q1: Why did Donald Trump end trade talks with Canada?
Because Canada imposed a 3% digital tax on U.S. tech companies like Google, Meta, and Amazon.

Q2: What tariff response is Trump planning on Canada?
Trump said a new U.S. tariff—following Canada’s 400% dairy tariff—will be announced by July 4, 2025.