By David Lawder, Susan Heavey and Manoj Kumar
WASHINGTON (Reuters) -U.S. President Donald Trump on Friday abruptly cut off trade talks with Canada over its tax targeting U.S. technology firms, calling it a “blatant attack” and saying that he would set a new tariff rate on Canadian goods within the next week.
The move plunges U.S. relations with its second-largest trading partner back into chaos after a period of relative calm.
It also came just hours after Trump’s Treasury secretary, Scott Bessent, struck an upbeat tone on trade, touting progress had been made with China on reviving the flow of critical minerals for the U.S. manufacturing sector and in other key tariff negotiations.
The often-chaotic rollout of Trump’s import levies since his return to office this year have frequently whipsawed financial markets, and have begun to weigh on consumer spending, the bedrock of the U.S. economy. U.S. stocks were briefly batted lower by his broadside against Canada, but managed to close out the week at record highs for the S&P 500 and Nasdaq.
Trump’s action comes ahead of a Canada’s plans to begin collecting on Monday a longstanding digital services tax on U.S. technology firms including Amazon, Meta, Alphabet’s Google and Apple, among others.
The tax is 3% of the digital services revenue a firm takes in from Canadian users above $20 million in a calendar year, and payments will be retroactive to 2022.
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.”
Canada is the second-largest U.S. trading partner after Mexico, buying $349.4 billion of U.S. goods last year and exporting $412.7 billion to the U.S., according to U.S. Census Bureau data.
Canadian Prime Minister Mark Carney had said on June 16 he and Trump agreed to try to wrap up a new economic and security deal within 30 days.
“The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses,” Carney’s office said in a statement.
‘WRAPPED UP BY LABOR DAY’
Earlier on Friday, Bessent said the Trump administration’s various trade deals with other countries could be done by the Sept. 1 Labor Day holiday, citing talks with 18 top trade partners and another revision to a deal with China to reopen the flow of rare earth minerals and magnets.
After a week where tariffs took a back seat to the U.S. strike on Iran’s nuclear facilities and the massive tax and spending bill in the U.S. Congress, the Trump administration’s trade negotiations have picked up.
The United States sent a new proposal to the European Union on Thursday and India sent a delegation to Washington for more talks.
“So we have countries approaching us with very good deals,” Bessent said on Fox Business Network.
“We have 18 important trading partners. … If we can ink 10 or 12 of the important 18, there are another important 20 relationships, then I think we could have trade wrapped up by Labor Day,” Bessent said.
He did not mention any changes to a July 9 deadline for countries to reach deals with the United States or see tariffs spike higher, but has previously said that countries negotiating in good faith could get deals.
But Trump told reporters at the White House that he could extend the tariff deadline or “make it shorter,” adding that within the next week and a half, he would notify countries of their tariff rates.
“I’d like to just send letters out to everybody: Congratulations. You’re paying 25%” tariffs.
NEW U.S.-CHINA EXPORT REVISIONS
Bessent said the United States and China had resolved issues surrounding shipments of Chinese rare earth minerals and magnets to the U.S., further modifying a deal reached in May in Geneva.
As part of its retaliation against new U.S. tariffs, China suspended exports of a wide range of critical minerals and magnets, upending supply chains central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.
During U.S.-China talks in May in Geneva, Beijing committed to removing the measures imposed since April 2, but those critical materials were not moving as fast as agreed, Bessent said, so the U.S. put countermeasures in place.
“I am confident now that we — as agreed, the magnets will flow,” Bessent said, adding that these materials would go to U.S. firms that had received them previously on a regular basis. He did not disclose details of the latest agreement, which Trump administration officials said was reached earlier this week.
Efforts to resolve the dispute included a phone call between Trump and Chinese President Xi Jinping which led to teams from both sides meeting again in London, as negotiators try to end a trade war between the world’s biggest economies.
China’s commerce ministry said on Friday the two countries have confirmed details on the framework of implementing the Geneva trade talks consensus. It said China will approve export applications of controlled items in accordance with the law. It did not mention rare earths.
(Reporting by Susan Heavey and Doina Chiacu; Editing by William Maclean and Sandra Maler)
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