Canada rescinds digital services tax to resume negotiations with U.S.

Canada is rescinding its digital services tax and will resume trade negotiations with the United States, Finance Minister Francois-Philippe Champagne said in a statement issued late Sunday night. Photo by Justin Tang/The Canadian Press

Article content

OTTAWA — Canada is rescinding its digital services tax and will resume trade negotiations with the United States, Finance Minister Francois-Philippe Champagne said in a statement issued late Sunday night.

Article content

The announcement came following a phone call between Prime Minister Mark Carney and U.S. President Donald Trump, and just hours before the first payment under the tax was going to come due for major tech companies like Amazon and Google.

Article content

Article content

Article content

On Friday Trump announced on his social media platform Truth Social he was terminating all trade discussions with Canada because of the tax.

Article content

Article content

“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,” Carney said in a written statement on Sunday.

Article content

He also said Canada’s negotiations with the U.S. “will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses.

Article content

A spokeswoman for Carney confirmed the call with Trump, and also said Champagne spoke Sunday with U.S. Treasury Secretary Scott Bessent.

Article content

In his Friday post, Trump called the digital services tax a “direct and blatant attack” on the U.S. and threatened to hit Canada with another round of punishing tariffs, saying he’d inform Canada by July 4 of the cost “to do business with the United States.”

Article content

It was a sudden change of heart by the president, less than two weeks after Trump and Carney appeared to have a positive bilateral discussion at the G7 summit, where they agreed to try and conclude their trade talks within a month.

Article content

Article content

Carney and Trump have been negotiating since early May, when Carney visited the White House after the conclusion of the Canadian election. The two had agreed early during that campaign that Canada and the U.S. would work on a new economic and security deal once Canadians decided on their new government.

Article content

Those discussions came after Trump imposed punishing tariffs on Canada, along with most other countries. Earlier this month Trump doubled already devastating duties on aluminum and steel to 50 per cent.

Article content

Neither Trump nor the White House have yet commented on Canada’s decision to rescind the tax.

Article content

The tax was going to apply to all big tech companies that operate online marketplaces or advertising services and social media platforms, and those that earn revenue from some sales of user data. It wasn’t specific to the U.S. but most of the companies affected by it are American, including Google, Meta and Amazon.

Article content

The U.S. has criticized the tax for years, and the administration of former president Joe Biden lobbied Canada hard not to proceed with it. In August the Biden administration launched dispute settlement consultations with Canada under the Canada-United States-Mexico Agreement.