The move plunges US relations with its second-largest trading partner back into chaos after a period of relative calm.
It also came just hours after 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 US 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 US economy.
US 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 Canada's plans to begin collecting on Monday a longstanding digital services tax on US technology firms including Amazon, Meta, Alphabet's Google and Apple among others.
The tax is 3.0 per cent of the digital services revenue a firm takes in from Canadian users above $US20 million ($A31 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 US trading partner after Mexico, buying $US349.4 billion of US goods last year and exporting $US412.7 billion to the US, according to US 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.
Earlier on Friday, Bessent said the Trump administration's various trade deals with other countries could be done by the September 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.
The United States sent a new proposal to the European Union on Thursday and India sent a delegation to Washington DC 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 per cent" tariffs, Trump said in an apparent joke.
Bessent said the United States and China had resolved issues surrounding shipments of Chinese rare earth minerals and magnets to the US, further modifying a deal reached in May in Geneva.
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.
