In a bid to revive stalled trade negotiations with the United States, Canada has rescinded its digital services tax, which was set to take effect on Monday, retroactive to 2022. The tax targeted major US technology firms, including Amazon, Meta, Alphabet’s Google, and Apple, among others. US President Donald Trump had called off trade talks between the two countries, citing the tax as “a direct and blatant attack on our Country.”
The Canadian government announced the decision on Sunday, with Minister of Finance and National Revenue François-Philippe Champagne stating that the move would allow for vital progress in negotiations for a new economic and security relationship with the United States. Prime Minister Mark Carney and President Trump have agreed to resume trade negotiations, aiming to finalize a deal by July 21, 2025.
The digital services tax was part of Canada’s effort to tax online services, but it drew criticism from the US, with Trump labeling it a “non-tariff trade barrier” that restricts competition within Canada’s borders, often at the expense of US companies. Canada’s decision to rescind the tax is seen as a major win for Trump, who has been vocal about other countries “ripping off” the United States.
The trade relationship between Canada and the US has been under strain since Trump returned to office in January, with the US threatening a tariff of at least 25% on all Canadian exports. Trump’s tariff changes have created uncertainty in the US and abroad, prompting companies to reassess their plans for the rest of the year. A deadline for dozens of countries to avoid “reciprocal” tariffs unless they negotiate deals with the US expires on July 9, and it’s unclear if Trump will extend this deadline.
The decision to rescind the digital services tax is a strategic move by Canada to improve bilateral relations and potentially boost cross-border trade benefits with its North American neighbor. Canada is the top buyer of American goods, importing $349 billion worth last year, while Canada shipped $413 billion worth of goods to the US, the third-highest source of foreign goods.
