Canada bows to pressure, drops digital services tax to revive trade talks with US

Tosin AinaJune 30, 20251 Mins read148 Views

Canada has announced it will scrap its planned digital services tax in a bid to restart trade talks with the United States.

The move follows President Donald Trump’s decision on Friday to cancel negotiations, calling the tax “a direct and blatant attack on our Country.”

In a statement released Sunday night, the Canadian government said it would back down from the measure, which would have targeted revenue generated by online companies.

“To support those negotiations, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” the statement said.

It added, “Consistent with this action, Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.”

Digital services taxes are levies on online platforms rather than physical goods.

President Trump has often labeled such measures “non-tariff trade barriers,” accusing other countries of using them to restrict competition and harm US businesses.

Canada’s DST was scheduled to take effect Monday and would have applied retroactively to 2022.

Its cancellation marks a significant political win for Trump, who frequently claims that America’s trading partners are “ripping off” the United States.

Although Canada and the US are close economic allies, their relationship has been strained since Trump returned to office in January.

He quickly threatened to impose tariffs of at least 25% on all Canadian exports.

Since then, his administration has introduced sweeping changes to trade policies and tariff structures—not just for Canada, but for countries around the globe.

These shifts have created widespread uncertainty, prompting many companies to reassess their plans for the rest of the year.

More changes may be imminent.

On July 9, a deadline arrives for dozens of countries to strike trade agreements with the US or face “reciprocal” tariffs.

While Trump has the authority to extend the deadline, it is unclear whether he will.

Canada remains a key US trading partner.

Last year, it imported $349 billion worth of American goods and exported $413 billion to the US, making it the third-largest source of foreign imports.

(CNN)