The Canadian government has decided to scrap its digital services tax to prevent further delays in trade negotiations with the United States. This decision comes just two days after U.S. President Donald Trump declared the cessation of talks regarding the levy.
By eliminating the tax, Ottawa aims to realign its trade discussions with the U.S. to secure a deal by July 21.
On June 27, Trump announced the termination of all trade discussions with Canada, specifically citing Canada’s digital services tax (DST), which would impose financial burdens on U.S.-based technology giants like Amazon, Google, and Netflix.
“In our negotiations for a new economic and security framework between Canada and the United States, the new Canadian government will prioritize the overall benefits of any agreement for Canadian workers and businesses,” stated Prime Minister Mark Carney following the tax’s repeal on June 29.
“Today’s announcement is intended to pave the way for renewed negotiations ahead of the July 21, 2025, deadline established during this month’s G7 Leaders’ Summit in Kananaskis.”
At the G7 summit in Kananaskis, Alberta, on June 16, both Carney and Trump agreed to finalize a trade agreement within a month.
The proposed DST was set to impose a 3 percent tax on the revenue that tech companies generate from services offered to Canadian users. Scheduled to take effect on June 30 and retroactive to 2022, it had the potential to leave U.S. companies with a hefty $2 billion tax bill due by the end of June.
This tax had been a point of contention for both the Biden and Trump administrations.
“Due to this outrageous tax, we are terminating all discussions regarding trade with Canada, effective immediately,” Trump stated on June 27. “We will inform Canada of the tariffs they will incur to do business with the United States within the next seven days.”
Previously, the Trump administration had already implemented a 25 percent tariff on Canadian exports, with certain goods under the U.S.–Mexico–Canada Agreement exempted. Additionally, tariffs on all steel and aluminum imports were enforced.
Trump remarked on June 27 that the United States possesses “significant influence over Canada.”
“We hold all the cards. We conduct a considerable amount of business with Canada,” he asserted. “Given this dynamic, one must treat others with respect.”
In light of U.S. tariffs, Ottawa has been eager to initiate fresh trade negotiations to alleviate these economic pressures.
In his announcement regarding the repeal of the DST, Canadian Minister of Finance François-Philippe Champagne emphasized that this move would facilitate progress in trade negotiations with the United States.
“The new Canadian government is dedicated to fostering the strongest economy in the G7 and advocating for Canadian workers and businesses,” Champagne stated on June 29.
“Abolishing the digital services tax will enable critical advancements in negotiations for a new economic and security partnership with the United States, reinforcing our commitment to job creation and prosperity for all Canadians.”
Ironically, just a week earlier, on June 19, Champagne had asserted that Ottawa would not be halting the tax, despite mounting pressure from business organizations and U.S. political figures. The Canadian Liberal government had maintained that the tax aligned with similar initiatives in other nations and aimed to ensure corporations contribute their “fair share” of taxes in Canada.
The Office of the Parliamentary Budget Officer had estimated that the DST would generate approximately $7.2 billion in revenue for Ottawa over five years.
Andrew Moran and The Canadian Press contributed to this report.
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