In a significant move to salvage trade negotiations with the US, Canada has decided to shelve its plans to impose a digital services tax (DST) on tech companies. The 3% tax, which was set to take effect on Monday, would have primarily targeted US companies like Amazon, Google, and Meta, costing them an estimated $3 billion. This decision comes after US President Donald Trump denounced the tax hike as a “direct and blatant attack on our country” and threatened to terminate all trade negotiations between the two nations.
Canadian Prime Minister Mark Carney announced the reversal, stating that it would support the resumption of negotiations toward a new economic agreement with the US. The negotiations are ongoing, with a goal to finalize a new agreement by July 21, 2025. Carney emphasized that Canada’s new government will prioritize the best interests of Canadian workers and businesses in any potential agreement.
The tensions between Canada and the US have been escalating since February, when Trump imposed a 25% tariff on Canadian goods. Ottawa responded with reciprocal duties, but Trump later suspended the measure, indicating his openness to country-specific deals that benefit US businesses. Trump has long accused Canada of exploiting US trade and has even suggested that Canada should become America’s 51st state.
The decision to drop the DST has been welcomed by US Commerce Secretary Howard Lutnick, who stated that the tax would have been a “deal breaker” for any trade deal with America. Canadian Finance Minister Francois-Philippe Champagne also expressed his support for the move, saying it would allow Ottawa to make vital progress and reinforce its work to create jobs and build prosperity for all Canadians.
The trade relationship between Canada and the US is significant, with Canada being the US’s second-largest trading partner after Mexico. According to the US Census Bureau, Canada imported $349 billion in American goods last year and exported $412 billion to the US. The reversal of the DST is seen as a crucial step in maintaining a positive trade relationship between the two nations and avoiding further escalation of tensions.
As the negotiations between Canada and the US continue, it remains to be seen how the two countries will work together to finalize a new economic agreement. However, the decision to shelve the DST is a positive step towards resolving the trade disputes and promoting economic cooperation between the two nations. With the goal of finalizing a new agreement by July 21, 2025, both countries are working towards a mutually beneficial trade relationship that will support the growth and prosperity of their economies.
