Key Points
- Canada scrapped its new digital services tax on U.S. tech giants at the last minute.
- The move came after President Trump called the tax a “blatant attack” and threatened to impose new tariffs on all Canadian goods.
- With the tax gone, trade negotiations between the U.S. and Canada are set to resume.
- The two countries will try to reach a new trade agreement by July 21.
Canada abruptly scrapped its new digital services tax on big U.S. tech companies late on Sunday night, just hours before it was set to take effect. The last-minute reversal was a clear attempt to get trade talks with the United States back on track after President Donald Trump threatened to derail them.
The controversial 3% tax would have impacted the Canadian revenues of tech giants such as Google, Meta, and Amazon. Trump called the tax a “blatant attack” on the U.S., and on Friday, he suddenly called off all trade negotiations with Canada. He then threatened to set a new, high tariff rate on all Canadian goods within a week, a move that would have thrown the two countries’ relationship into chaos.
This all came after the two leaders, Trump and Canadian Prime Minister Mark Carney, had met at the G7 summit in June and agreed to try to wrap up a new trade deal within 30 days.
With the threat of a full-blown trade war looming, Canada blinked. The country’s finance ministry announced that the tax would be halted and that new legislation would be introduced to cancel it officially. In a statement, they said their preference was always for a global agreement on how to tax tech companies, not a unilateral one.
The move appears to have been successful, at least for now. Canada announced that trade talks with the U.S. will resume to reach a deal by July 21. Stock markets immediately rose on the news.
