Canada scraps digital tax, paving way for trade talks with US

The United States will restart trade negotiations with Canada after Ottawa cancelled a digital services tax that was set to target big US technology companies. The announcement was made by White House economic adviser Kevin Hassett on Monday.

"Absolutely," Hassett said in response to a question on Fox News about whether talks would resume.

The tax, which was to take effect Monday, would have imposed a 3% levy on the Canadian revenues of large digital firms like Amazon, Google, Meta, and Apple. The tax would have applied to revenue exceeding $20 million from Canadian users and would have been retroactive to 2022.

Canada’s finance ministry said the country had decided to delay its implementation, hours before the tax was scheduled to begin. The ministry also confirmed that Prime Minister Mark Carney had spoken to US President Donald Trump and agreed to restart trade negotiations, aiming to reach a new deal by July 21.

WHITE HOUSE PRAISES TRUMP’S APPROACH

White House press secretary Karoline Leavitt credited President Trump’s tough stance for Canada’s change of heart. "Very simple. Prime Minister Carney in Canada caved to President Trump and the United States of America," Leavitt told reporters. "President Trump knows... that every country on the planet needs to have good trade relationships with the United States."

Trump had pushed for Canada to cancel the tax during the recent G7 summit. Hassett said, "It’s something that they’ve studied, now they’ve agreed to, and for sure, that means that we can get back to the negotiations."

US Commerce Secretary Howard Lutnick also welcomed the decision on social media, writing: “Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America.”

Trump reportedly plans to meet with his trade team this week to finalise tariff rates for countries not actively negotiating.

PUSHBACK IN CANADA

Days earlier, Trump had threatened to increase tariffs on Canadian goods and referred to the digital tax as a "blatant attack," ending trade negotiations with Canada. In Canada, the abrupt reversal has generated discussion.

Some Canadian experts and opposition leaders criticised Prime Minister Carney for backing down. “It feels like we’re standing down really quickly,” said Vass Bednar of the Canadian Shield Institute for Public Policy. Conservative leader Pierre Poilievre demanded that the Canadian government push harder to secure better terms. “Canadians need certainty that Liberals will put Canada First and defend Canadian sovereignty in these negotiations,” he said.

According to the US Census Bureau, Canada is the country's second-largest trading partner after Mexico. Last year, it exported $412.7 billion worth of goods to the US and purchased $349.4 billion worth of US goods. Canada will face a 50% tariff on its exports of steel and aluminium to the US, even though it was exempt from Trump's extensive April tariffs.

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With inputs from Reuters