Canada rescinds digital services tax to advance stalled trade talks with US
FILE PHOTO: U.S. President Donald Trump and Canadian Prime Minister Mark Carney attend a meeting with G7 leaders and guests, at the G7 summit in Kananaskis, Alberta, Canada, June 16, 2025. REUTERS/Kevin Lamarque/File Photo
OTTAWA - Canada scrapped its digital services tax targeting U.S. technology firms just hours before it was due to take effect on Monday, in a bid to advance stalled trade negotiations with the U.S.
Canadian Prime Minister Mark Carney and U.S. President Donald Trump will resume trade negotiations in order to agree on a deal by July 21, Canada's finance ministry said in a statement late on Sunday.
"Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America," U.S. Commerce Secretary Howard Lutnick responded in a post on X.
Wall Street futures hit record highs on Monday morning as sentiment in the markets rose amid optimism over U.S. trade negotiations with key partners, including Canada.
Trump abruptly called off trade talks on Friday over Canada's digital services tax, saying it was a "blatant attack."
He reiterated his comments on Sunday, pledging to set a new tariff rate on Canadian goods within the next week, which threatened to push U.S.-Canada relations back into chaos after a period of relative calm.
Trump and Carney met at a G7 summit earlier this month, with the Canadian prime minister saying they had agreed to wrap up a new economic agreement within 30 days.
Canada's planned digital tax was 3% of the digital services revenue a firm takes in from Canadian users above $20 million in a calendar year, and payments were to be retroactive to 2022.
It would have impacted U.S. technology firms, including Amazon.com, Meta, Alphabet's Google and Apple.
The tax collection slated for Monday will be halted, the statement from Canada's finance ministry said. Finance Minister Francois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax Act.
"The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians," the statement said. "Canada's preference has always been a multilateral agreement related to digital services taxation."
Canada is the second-largest U.S. trading partner after Mexico, and the largest buyer of U.S. exports. It bought $349.4 billion of U.S. goods last year and exported $412.7 billion to the U.S., according to U.S. Census Bureau data.
The Biden administration had requested trade dispute settlement consultations over the Canadian digital services tax in 2024, saying it was inconsistent with Canada's North American trade deal obligations.
Canada had escaped Trump's broad tariffs imposed in April but faces 50% duties on steel and aluminum exports to the U.S. REUTERS
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