**Prime Minister Mark Carney and U.S. President Donald Trump met at the G7 Leaders’ Summit in Kananaskis, Alta. earlier this month. /** **GOVERNMENT OF CANADA PHOTO**

Prime Minister Mark Carney says the government will “continue to engage in these complex negotiations in the best interests of Canadian workers and businesses,” following President Donald Trump’s announcement he is “terminating” all trade negotiations with Canada because of the implementation of Canada’s digital services tax.

In a social media post, Trump said the tax is a “direct and blatant attack” and that the U.S. 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.”

Later in the Oval Office, he told reporters: “We have such power over Canada.” He added Canada was “foolish” to go ahead with the tax and that the U.S. would “stop all negotiations with Canada right now until they straighten out their act.”

The digital services tax, set to take effect on June 30, would require major U.S. tech companies to pay a 3 per cent levy on digital services revenue collected from Canadian users. The tax would affect major U.S. companies with global revenues exceeding $1.1 billion, such as Amazon, Meta, Google, Uber and Airbnb.

Though the government has held back on imposing many retaliatory tariffs to spare Canadians economic pain, Prime Minister Mark Carney told reporters last week that if a trade deal could not be reached by the July 21 deadline, the government would go ahead with a new wave of countertariffs on U.S. steel and aluminum products, set at a rate that is “consistent with progress made.”

The Canadian dollar dropped more than 0.5 per cent against the U.S. dollar almost immediately following Trump’s post, dragging down Canada’s benchmark equity index and the shares of border-reliant companies.

Finance Minister François-Philippe Champagne said on June 19 Canada would proceed with the tax, which went against the U.S.’ demands in trade negotiations.

A group of 21 U.S. lawmakers asked Trump to push for the tax’s removal earlier this month, estimating it will cost American companies $2 billion. Treasury Secretary Scott Bessent said he now expects that Trump trade representative Jamieson Greer to start an unfair trade practice investigation under Section 301 of the Trade Act of 1974 “to determine the amount of harm” that the new Canadian taxes pose to the U.S., CNBC reported.

Newly appointed chief trade negotiator and Canada’s ambassador to the U.S. Kirsten Hillman told the Wall Street Journal on Tuesday that Canadian and U.S. negotiators met four times last week, and would meet three times in the upcoming week. Hillman said her goal was open and stable trade with the U.S., which she said is “ultimately” a need for Canadian workers and businesses, and has led to “enormous” success in the U.S. Hillman was “fighting for” the 99 per cent tariff free trade environment which was previously negotiated with Americans under CUSMA.

However, hope for the removal of tariffs seemed to be waning before Trump’s post. On Friday morning, the Globe and Mail reported that several business leaders and industry representatives who’ve had conversations with the Canadian negotiating team have been asked what level of tariffs they could live with. This reflects a growing sense in the business community and among trade experts that Trump was unlikely to remove all the tariffs he’s placed on Canadian goods, regardless of what Canada offers.

Trump is trying to “gain leverage” over Canada, said Senator Hassan Yussuff, who sits on the Canada-U.S. advisory council, which was in a meeting hosted by the Prime Minister during Trump’s announcement. “We kind of expected him to do something dramatic,” said Yussuff. “He thinks every time he reacts like this, he will get a reaction out of us and I think we just stop reacting and we’ll negotiate if we can get a good deal.”