EditTrump halts U.S.-Canada trade talks over digital tax, highlighting risks for the EU
The European Commission’s push for similar taxes on U.S. tech firms risks escalating transatlantic tensions
U.S. President Donald Trump’s decision to suspend trade talks with Canada on 27 June over its digital services tax has heightened global trade tensions, with significant implications for the European Union as it faces a July 9 deadline for tariff deals with the U.S.
Trump announced the halt of negotiations with Canada via Truth Social, denouncing its 3% digital services tax on U.S. tech giants like Amazon, Meta, Google, and Apple, applied retroactively from 2022 for firms earning over $20 million annually from Canadian users.
Labelling it a “direct attack” on the U.S., Trump vowed to impose new tariffs on Canadian goods within seven days, emphasizing U.S. leverage over Canada, the second-largest U.S. trading partner ($349.4 billion in U.S. exports in 2024).
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump said. “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.”
Speaking to reporters at the White House, Trump said that the negotiations with Canada would not resume “until they straighten out their act,” adding that the U.S. holds “such power over Canada.”
The move shattered optimism following a mid-June G7 meeting where Trump and Canadian Prime Minister Mark Carney agreed to finalise a new economic deal within 30 days. U.S. Treasury Secretary Scott Bessent, who earlier highlighted progress in trade talks with China and others, downplayed the dispute, suggesting a Section 301 probe could lead to retaliatory tariffs matching the $2 billion harm to U.S. firms.
EU’s digital tax dilemma and tariff deadline
The EU faces a parallel challenge as it approaches the 9 July deadline set by the U.S. for trade partners to finalize deals or face higher tariffs. The European Commission has championed digital services taxes targeting U.S. tech firms to ensure fair taxation of digital revenues. However, Trump’s reaction to Canada signals potential U.S. retaliation against EU nations pursuing similar taxes, complicating negotiations.
With Trump hinting at flexibility on the 9 July deadline but threatening blanket 25% tariffs, the EU risks billions in retaliatory tariffs that could disrupt trade and consumer markets, already strained by U.S. tariff policies.
Trump’s Canada decision coincides with broader trade negotiations. Bessent expressed confidence in concluding deals with 18 key partners by Labor Day, 1 September, citing progress with China on critical minerals like rare earths and magnets, vital for U.S. manufacturing. A May 2025 Geneva agreement aimed to restore these supply chains, disrupted by China’s export bans in retaliation for U.S. tariffs. Bessent confirmed revised terms would ensure steady flows, with reciprocal U.S. exports to China.
The U.S. also sent a trade proposal to the EU on 26 June and held talks with India and Japan, indicating a multi-front strategy. However, Trump’s erratic tariff policy has unsettled markets, with the S&P 500 and Nasdaq briefly dipping after the Canada announcement but closing at record highs.
With Reuters, edited by g.g.
Caption: Canadian Prime Minister Mark Carney and US President Donald Trump talk during a family photo at the Group of Seven (G7) Summit at the Kananaskis Country Golf Course in Kananaskis, Alberta, Canada, 16 June 2025. World leaders are gathered from 15 to 17 June 2025 for the annual G7 Summit. EPA/LUDOVIC MARIN / POOL
Updated: June 28, 2025 - 07:04
