Canada Cancels Digital Tax and Resumes Trade Negotiations with the United States
Canada has announced the resumption of trade negotiations with the United States and the cancellation of a digital tax on American tech companies, which had prompted President Donald Trump to halt discussions.
Ottawa imposed the digital services tax last year, expecting it to raise CAD 5.9 billion over five years. Although this measure is not new, the Computer and Communications Industry Association recently indicated that the tax would impose billions of dollars in taxes on American service providers in Canada by June 30.
Washington had requested talks to resolve the dispute over this issue. However, Trump unexpectedly announced on Friday the immediate termination of trade negotiations with Canada in response to the tax, clarifying that Ottawa would soon know the tariff rate it would face this week.
Canadian Finance Minister François-Philippe Champagne stated in a statement that Trump and Canadian Prime Minister Mark Carney “agreed to resume negotiations with the aim of reaching a deal by July 21, 2025.” He added that “Canada will eliminate the digital services tax in anticipation of a comprehensive trade agreement with the United States that benefits both sides.”
There was no immediate comment from the White House or Trump.
U.S. Treasury Secretary Scott Bessen stated to CNBC on Friday that Washington hopes the Canadian government will suspend the digital services tax “as a gesture of goodwill.”
On Friday, Trump announced he would end trade negotiations between the neighboring North American countries due to the Canadian tax.
The 3% tax targets large or multinational companies like Alphabet, Amazon, and Meta, which provide digital services to Canadians.
“Establishing Stability”
Canada was exempted from some global tariffs imposed by Trump on other countries but faces a separate tariff system.
Since returning to the White House in January, Trump has also imposed hefty tariffs on imports of steel, aluminum, and automobiles.
Canada is one of the largest exporters of steel and aluminum to the United States.
On June 19, Carney announced that his country would “adjust” its counter-tariffs of 25% on U.S. steel and aluminum imports in response to the increased U.S. tariffs if no trade agreement is reached within 30 days.
The Canadian Prime Minister emphasized on Friday that Canada “will continue to engage in these complex negotiations in the best interest of Canadians.”
Previously, Carney had stated that achieving good results in the talks would mean “establishing stability in trade relations with the United States” and “ensuring easy access for Canadian companies to the U.S. markets,” without “tying our hands in dealing with the rest of the world.”
Trump and Carney met on the sidelines of the G7 Summit hosted by Canada earlier in June. Leaders from industrial nations urged the U.S. President to back down from his trade war against American partners.
Dozens of countries are awaiting the July 9 deadline, when additional tariffs that Trump has approved are set to take effect, adding to the current 10% tariff.
Multiple parties are negotiating with the United States in an effort to finalize agreements before the deadline expires.
