Canada rescinds Digital Services Tax after Trump cuts off U.S. trade talks

• The move comes after Trump announced over the weekend that he will be “terminating ALL discussions on Trade with Canada.”
• The first payments from Canada's digital services tax were initially set to be collected Monday.
• The tax would have applied to both domestic and foreign tech companies with a 3% levy.

Canada has walked back on its digital services tax “in anticipation” of a mutually beneficial comprehensive trade arrangement with the United States, Ottawa announced Sunday night.

The move comes after U.S. President Donald Trump announced over the weekend that he will be “terminating ALL discussions on Trade with Canada” in response to Ottawa's decision to impose a digital services tax on American tech firms.

“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,” Canadian Prime Minister Mark Carney said in the statement.

This decision from Ottawa was an about-turn from Canadian officials earlier this month, who said they would not pause the digital services tax, despite strong opposition from the U.S.

Canada's Minister of Finance and National Revenue Francois-Philippe Champagne added, “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.”

However, the statement from Canada's finance ministry also said that Carney “has been clear that Canada will take as long as necessary, but no longer, to achieve that deal.”

The first payments from Canada's digital services tax, which was enacted last year and applies retroactively to 2022, were initially set to be collected Monday.

The tax would have applied to both domestic and foreign tech companies, including U.S. giants such as Amazon, Google and Meta with a 3% levy.