Trade negotiations between Canada and the United States are back on track following Canada’s decision to withdraw its planned digital services tax targeting U.S. tech firms. The policy reversal came after President Trump suspended talks last Friday in protest of the proposed levy, calling it “a direct and blatant attack on our country.”
The Canadian government announced that “in anticipation” of a trade agreement, “Canada would rescind” the Digital Services Tax, which was scheduled to take effect on Monday.
Canadian Prime Minister Mark Carney and President Trump held a phone conversation on Sunday during which both leaders agreed to resume dialogue.
“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,” Carney said in a statement.
The tax in question would have applied a 3% levy on revenues generated from Canadian users by major digital platforms such as Amazon, Google, Meta, Uber, and Airbnb. Set to be retroactive, the measure was expected to cost U.S. companies up to $2 billion, payable by the end of the month.
President Trump had earlier stated via his social media platform that Canada was moving forward with the tax, prompting him to halt trade negotiations.
Carney’s recent visit to the White House in May, followed by Trump’s trip to Alberta for the G7 Summit, saw both leaders agree on a 30-day timeline for advancing trade discussions.
The U-turn on the tax has drawn sharp commentary from Canadian political analysts.
Daniel Béland, a political science professor at McGill University, described Carney’s move as a “clear victory” for President Trump.
“At some point, this move might have become necessary in the context of Canada-U.S. trade negotiations themselves, but Prime Minister Carney acted now to appease President Trump and have him agree to simply resume these negotiations, which is a clear victory for both the White House and big tech,” Béland said.
“President Trump forced PM Carney to do exactly what big tech wanted. U.S. tech executives will be very happy with this outcome.”
Canadian Finance Minister François-Philippe Champagne also held discussions with U.S. Treasury Secretary Scott Bessent on Sunday.
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress,” Champagne said.
Friday’s announcement was the latest in a series of abrupt developments in the evolving U.S.–Canada trade landscape under Trump’s second administration. Since returning to office in January, President Trump has launched a renewed trade offensive, often taking a combative tone toward Canada—at times even suggesting it could be absorbed into the U.S.
Key issues on the negotiation table include a range of steep tariffs imposed by the U.S. Trump has levied 50% duties on Canadian steel and aluminum, 25% on autos, and a 10% tax on most general imports, with a potential rate hike expected after July 9, the end of the current 90-day negotiating window.
Canada and Mexico are also contending with separate tariffs of up to 25%, imposed under the Trump administration’s justification of curbing fentanyl smuggling. However, certain goods remain protected under the 2020 U.S.-Mexico-Canada Agreement (USMCA), enacted during Trump’s first term.
