WASHINGTON—President Trump said he terminated trade talks with Canada over what he called an “egregious” digital-services tax on U.S. tech companies, plunging relations with America’s second-largest trading partner back into turmoil.

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.