Canada rescinds digital services tax after Trump suspends trade talks

Washington Post

2 days ago

TORONTO — Canada late Sunday said it would rescind a new tax it planned to collect from large tech companies after President Donald Trump last week called it a 'blatant attack' on the United States and said he would suspend trade talks with Ottawa over it.
In a statement, the Canadian government said Prime Minister Mark Carney and Trump had agreed to resume negotiations on a 'mutually beneficial comprehensive trade agreement' and would aim to reach a deal by July 21. The White House did not immediately respond to a request for comment.
The move came hours before Canada was set to begin collecting the first payments from a digital services tax it implemented last year. The levy would have applied to tech firms such as Google, Apple, Meta and Amazon. (Amazon founder Jeff Bezos owns The Washington Post.)
A trade group representing those companies last week estimated that the tax, which would apply to revenue earned from social media services and online marketplaces involving Canadian users, would collectively cost U.S. firms as much as $2.3 billion annually.
The tax has long drawn opposition from Washington. The Biden administration argued that it discriminated against U.S. companies. Canadian business groups have also criticized the levy, in part because they believed it could strain U.S.-Canada ties and imperil a key trade relationship.
On Friday, it appeared their worst fears were confirmed. Trump said he would suspend trade talks over the tax, plunging U.S.-Canada relations into deeper turmoil.
Ties between the neighbors have been under severe strain since Trump returned to the Oval Office and put Canada in his crosshairs. He has imposed several sets of tariffs on Canadian goods, questioned Canada's viability as a country and threatened to use 'economic force' to make it the 51st state. Canada sends more than three-quarters of its exports to the U.S., and the tariffs are weighing on its economy.
'Economically, we have such power over Canada,' Trump told reporters Friday in the Oval Office after he announced the suspension of trade negotiations in a social media post. 'I'd rather not use it, but they did something with our tech companies … We have all the cards.'
Two days later, Canada bowed to his demands to scrap the tax in a bid to salvage the trade negotiations. In its statement Sunday, the Canadian government said it would soon introduce legislation in Parliament to cancel the tax.
Carney, who swept to power in a federal election in April by casting himself as the person best placed to handle Trump, appeared to have a more cordial relationship with the U.S. president than his predecessor, Justin Trudeau. Trump and Carney had agreed to accelerate talks to reach a new trade agreement at the Group of Seven summit that Canada hosted earlier this month.
'Prime Minister Carney has been clear that Canada will take as long as necessary, but no longer, to achieve that deal,' the government said in the statement.