Canada has reversed its digital services tax on U.S. tech firms, leading to the resumption of trade talks

Canada has rescinded its planned Digital Services Tax (DST), a move aimed at advancing stalled trade negotiations with the United States. The tax, initially set to take effect on June 30, 2025, was designed to impose a 3% levy on revenues generated by large technology companies from Canadian users. This decision comes after U.S. President Donald Trump criticized the tax as a “blatant attack” and threatened to terminate bilateral trade talks.

The DST was introduced in 2020 to address the taxation gap where many large tech firms operating in Canada were not paying taxes on revenues generated from Canadian users. It was set to apply retroactively to 2022, affecting companies such as Amazon, Google, Meta, and Apple.

In response to the tax announcement, President Trump suspended trade negotiations with Canada, labeling the tax as a direct and blatant attack on the U.S. He further threatened to impose tariffs on Canadian goods if the tax was implemented.

The Canadian government’s decision to rescind the DST aims to resume trade talks with the U.S., with both nations targeting a comprehensive agreement by July 21, 2025. Finance Minister François-Philippe Champagne emphasized that this move would allow for vital progress in negotiations toward a new economic and security relationship between the two countries.

The reversal of the DST has been welcomed by U.S. officials, who view it as a positive step toward resuming trade discussions. White House economic adviser Kevin Hassett confirmed that the U.S. would immediately restart trade negotiations with Canada following the tax’s removal.

This development is expected to ease tensions between the two nations and facilitate ongoing negotiations. The outcome of these talks will be closely monitored, as they have significant implications for the economic and security relations between Canada and the United States.