‘Very difficult country’: Trump halts US-Canada trade talks, threatens new tariffs

“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump said on his Truth Social platform. “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.”

Trump described Canada as a “very difficult country to TRADE with” and told reporters at the White House that talks would not resume “until they straighten out their act”, adding: “We hold such power over Canada.”

Canada is the United States’s second-largest trading partner, with bilateral goods trade exceeding $760 billion last year. Ottawa responded cautiously to Trump’s announcement, with Prime Minister Mark Carney’s office saying: “The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses.”

Despite initial market jitters, US equities closed the week at record highs, with the S&P 500 and Nasdaq brushing aside concerns over renewed trade tensions.

US Treasury Secretary Scott Bessent, speaking before Trump’s announcement, had expressed optimism over global trade negotiations, including ongoing talks with China and other major economies. Bessent later sought to downplay the rift with Canada, saying the US Trade Representative (USTR) would likely launch a Section 301 investigation into the digital tax — a move that could lead to retaliatory tariffs in proportion to estimated damages of roughly $2 billion to US firms.

The US has pursued similar responses to digital tax measures imposed by several European countries, though a USTR spokesperson declined to comment on the Canada case.

Earlier on Friday, Bessent indicated that several bilateral trade deals, including a revision to the US-China agreement on rare earths and magnets, could be finalised before the Labour Day deadline on September 1. The US is currently in discussions with 18 major trading partners, including the EU and India.

“If we can ink 10 or 12 of the important 18, there are another important 20 relationships,” Bessent said on Fox Business Network. “Then I think we could have trade wrapped up by Labor Day.”

Trump also indicated flexibility around the July 9 deadline for countries to reach trade agreements or face steeper tariffs. “I’d like to just send letters out to everybody: Congratulations. You’re paying 25%,” he said.

Progress on rare earths with China

In a separate development, Bessent confirmed that Washington and Beijing had resolved key issues surrounding Chinese exports of rare earths and magnets — materials critical to sectors such as electric vehicles, aerospace, and defence.

Following new US tariffs, China had suspended shipments of several rare earth elements, disrupting global supply chains. Although Beijing had agreed in Geneva in May to reverse those restrictions, US officials said implementation had lagged.

“I am confident now that… as agreed, the magnets will flow,” Bessent said, adding that Chinese materials would go to US firms with a prior history of receiving them. He also confirmed that US countermeasures on exports to China would be lifted once those shipments resumed.

China’s Commerce Ministry later said both sides had agreed on implementation details related to the May talks but made no mention of rare earths specifically.

Trade discussions also continued with India and Japan, with Tokyo confirming in a statement that both sides would continue to work towards a mutually beneficial agreement.

As the Trump administration races to conclude multiple deals, the sudden rupture with Canada underscores the unpredictability of US trade policy — and the geopolitical leverage the administration continues to exert through its tariff regime.