Canada Rescinds Digital Services Tax to Resume Trade Talks with U.S.

Canada has abruptly dropped its long-planned 3% Digital Services Tax (DST) on major tech firms, citing renewed efforts to reignite stalled trade negotiations with the United States. The decision comes just hours before the tax was due to take effect.

Finance Minister François‑Philippe Champagne announced late Sunday that Ottawa will halt collection of the DST and promptly introduce legislation to repeal the measure. The move was made “in anticipation of a mutually beneficial comprehensive trade arrangement” and to comply with a July 21 deadline agreed upon at June’s G7 summit.

Canadian Prime Minister Mark Carney confirmed a commitment to resume negotiations with the U.S. after President Trump threatened to terminate talks and imposed the tax on Canadian tech exports.

U.S. President Trump had labeled the DST a “direct and blatant attack” on American digital companies and suspended trade discussions last week in response. Trump later reaffirmed on Fox Business that talks would only restart if Canada withdrew the tax.

The DST, enacted in June 2024, was expected to generate approximately C$7.2 billion over five years by taxing foreign and domestic firms, such as Google, Amazon, Meta, Uber, and Netflix, on Canadian-source revenue. However, both U.S. tech leaders and domestic business groups denounced the tax, warning it would strain Canada’s trade relationship with the U.S.

Following the repeal announcement, both Canadian and U.S. officials have signaled progress toward a new trade deal scheduled by July 21. However, tariffs on steel and aluminum remain in place, and trade experts caution that a full resolution may still require broader negotiations.

With input from Fox Business