Trump's decision disrupts the relative lull in stormy US-Canada relations established during the G7 summit in mid-June, where he and Canadian Prime Minister Mark Carney agreed to finalize a new economic agreement within a month.

Hours prior, US Treasury Secretary Scott Bessent had optimistically reported progress in trade talks with China, focusing on restoring the critical mineral supply for US manufacturers and resolving other key tariff disputes.

Canada’s upcoming enforcement of a digital services tax on major US tech companies like Amazon, Meta, Google, and Apple, among others, provided context for Trump’s move.

The tax, which will be retroactive to 2022, imposes a 3% levy on digital services revenue exceeding $20 million from Canadian users per calendar year.

The chaotic implementation of Trump’s import tariffs since his return to office this year has frequently caused volatility in financial markets and started to impact consumer spending, a crucial pillar of the US economy.

Trump, in a post on his Truth Social media platform, called the tax “a direct and blatant attack on our country” and said Canada was a “very difficult country to TRADE with.”

“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 US holds “such power over Canada.”

Canada is the second-largest US trading partner after Mexico, and the largest buyer of US exports. It bought $349.4 billion of US goods last year and exported $412.7 billion to the US, according to US Census Bureau data.