Canada has withdrawn its digital services tax to help progress in trade discussions with the US, the country’s finance ministry confirmed, shortly after Donald Trump halted negotiations over disagreements on the tax.
Canadian prime minister Mark Carney and US president Donald Trump will restart talks with the goal of reaching an agreement by 21 July, the ministry stated late on Sunday.
The US has been in trade discussions with Canada, one of its largest global trade partners, for months. However, negotiations stalled on Friday when Trump claimed Canada was enforcing unjust taxes on US tech firms, calling it a clear challenge to American interests.
On Sunday, Trump repeated his stance, vowing to establish new tariffs on Canadian products in the coming week.
The tax would have applied a 3% rate on digital service revenues exceeding $20m annually from Canadian users, with payments backdated to 2022. The first installments were scheduled for Monday and would have affected major US tech firms, including Alphabet, Amazon, and Meta, totaling around $3bn.
“Canada’s government will always prioritize agreements that benefit workers and businesses,” Carney said, noting that the decision could lead to renewed talks.
Finance minister François-Philippe Champagne stated, “Ending this tax will help advance discussions on strengthening our economic and security ties with the US.”
Canada ranks as the second-largest US trade partner after Mexico and is the biggest purchaser of American exports. Last year, it imported $349bn in US goods and sent $412bn worth of products to the US, based on US Census Bureau figures.
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