Canada Drops Digital Services Tax, Resumes Trade Talks with U.S.

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Prime Minister Mark Carney, Leader of the Liberal Party
Prime Minister Mark Carney, Leader of the Liberal Party

OTTAWA – Political News – In a sudden reversal, Canada has rescinded its Digital Services Tax (DST), clearing the path to relaunch trade negotiations with the United States.

“In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses. 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,” stated Mark Carney,
Prime Minister of Canada

The move was confirmed in a statement from Finance Minister François‑Philippe Champagne late Sunday night.

“Canada’s new government is focused on building the strongest economy in the G7 and standing up for Canadian workers and businesses. Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” reported François-Philippe Champagne, Minister of Finance and National Revenue.

From Cut-Off to Reconnect

The announcement followed a phone call between Prime Minister Mark Carney and U.S. President Donald Trump, as well as a separate exchange involving Minister Champagne and U.S. Treasury Secretary Scott Bessent.

Trump had abruptly terminated trade talks on Friday, labelling the DST a “direct and blatant attack” on American tech firms like Google, Amazon, and Meta. It was another Trump Friday tantrum, and it appears this time it worked to move the Prime Minister.

Deadline and Trade Goals

Canada was set to collect the first DST payment retroactive to 2022 by June 30—an estimated $2 billion upfront, with total revenues over five years projected at $7.2 billion.

By scrapping the DST, Canada aims to resume talks with the goal of finalizing a new economic and security partnership by July 21, 2025, adhering to the timeline agreed at June’s G7 summit.

Protecting Canadian Business

Minister Champagne emphasized the reversal was made in Canada’s best interest, stating the country remains committed to negotiating terms that benefit both Canadian workers and businesses. The legislation to formally repeal the DST Act will be introduced shortly.

Reactions & Implications

  • Political observers say this is a victory for Trump and big U.S. tech companies. McGill University’s Daniel Béland described it as “a clear victory” for Trump, and a sign that Carney yielded to pressure according to a report from reuters.com.

  • Market reaction was swift: investor confidence surged, with strong movements in futures markets following the announcement.

Broader Trade Context

The DST was part of the Trudeau government’s 2019 promise, passed into law in June 2024. It targeted large digital companies earning over $20 million annually from Canadian users. Canada had planned retroactive payments dating back to 2022. However, the U.S. government and tech lobbyists viewed it as discriminatory under USMCA terms and countered with threats of tariffs and trade withdrawal.

What’s Next?

With DST off the table, Canada and the U.S. now aim to restore negotiations and finalize a deal by July 21. Whether this agreement encompasses greater market access, better deal terms, or broader economic cooperation remains to be seen.

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James Murray
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