U.S. and Canada restart trade talks after conflict over digital services tax

Prime Minister Mark Carney backed down on the digital services tax, which Donald Trump called out on Friday. Photo by ANDREW CABALLERO-REYNOLDS /AFP via Getty Images

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OTTAWA — Canada and the United States restarted trade talks on Monday after Prime Minister Mark Carney‘s government agreed to drop Canada’s digital services tax.

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U.S. President Donald Trump suspended negotiations with Canada over the tax on Friday, triggering a weekend of intense discussions between Canadian ministers and their U.S. counterparts.

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On Sunday night, Carney called Trump, and shortly after Ottawa announced it was eliminating the tax.

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White House economic adviser Kevin Hassett said Monday the U.S. would immediately restart trade talks with Canada. A spokeswoman for the Prime Minister’s Office confirmed trade talks have resumed.

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Hassett made the comments in an interview on Fox News, adding Trump asked Canada to drop the tax at the G7 meeting in Alberta earlier this month.

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The tax would have hit large tech companies, including Amazon.com Inc., Google, Meta Platforms Inc., Uber Technologies Inc. and Airbnb Inc., with a three per cent levy on revenue from Canadian users.

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Canada’s move to drop the tax came just as the first payment was about to come due. The initial payment was retroactive to 2022 and could have collectively cost American companies US$2 billion.

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The last-minute change caused some confusion among companies that were in the process of paying the tax.

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Tariq Nasir, a partner at EY Canada’s indirect tax practice, said some companies have given instructions to pay the tax, but the payments were not going through at the Canada Revenue Agency.

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Companies that have made the payments are now wondering how to get that money back and how to account for the payments in their quarterly statements, due in the next month.

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On Monday, business groups on both sides of the border praised the government for moving to eliminate the tax, while critics accused the government of capitulating to the U.S.

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Bloc Quebecois Leader Yves-Francois Blanchet said Carney campaigned during the election on finding a way out from under Trump’s tariffs but has nothing to show for it so far.

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In a social media post, Blanchet said Carney’s government “made significant compromises on defence, borders and counter-tariffs, and now it is backtracking on a widely supported measure to protect culture, still with nothing to show for it — no gains or progress for Quebec and Canada, neither on tariffs nor on trade.”

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“This is deeply concerning,” he said.

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Interim NDP Leader Don Davies said the decision to end the digital services tax amounts to “pure caving in to Trump and his billionaire friends.”

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“Canada is a sovereign country with the right to make our own tax laws. Abandoning fair taxation of tech giants is unacceptable appeasement,” Davies said in a social media post.

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Davies said that, coupled with Carney’s openness to Trump’s “Golden Dome” missile defence plan and his sprint to meet the new five per cent NATO defence spending benchmark, “it’s looking more & more like Mr. Carney had his elbows up during the pre-game skate — only to drop them once the game started.”