Canada drops digital tax to restart trade talks with US

Canada announced yesterday that it will rescind its 3% digital-services tax to restart trade talks with the US after President Donald Trump halted discussions on Friday over what he called an “egregious” tax targeting American tech giants.

Trump had warned of “terminating all trade discussions” unless the tax was withdrawn.

The tax, meant to raise billions from firms like Google and Meta, was set to take effect Monday and applied retroactively to 2022 revenues. 

Canadian Prime Minister Mark Carney spoke with President Trump on Sunday, and both agreed to resume trade discussions aiming for a deal by July 21.

Legislation to repeal the tax will be introduced in Canada’s Parliament, and the government hopes for a broader multilateral agreement. The country’s economy, already slowing due to reduced US exports, faces pressure to ease tensions.

The American Chamber of Commerce praised the move, while critics argued Ottawa ignored Washington’s earlier warnings.