Canada scraps tax on tech leading companies in order to resuscitate US trade discussions
(MENAFN) Canada has decided to abandon its planned digital services tax (DST) on major tech companies in an effort to restart stalled trade negotiations with the United States. The 3% tax, originally passed under former Prime Minister Justin Trudeau, was set to take effect on Monday and apply retroactively to profits from 2022 to 2024. It was expected to cost American tech giants such as Amazon, Google, and Meta approximately $3 billion.
In a statement on Sunday, Canadian Prime Minister Mark Carney said the decision paves the way to resume talks aimed at reaching a new economic agreement by the July 21, 2025 deadline set during the G7 summit in Kananaskis. He emphasized that Canada’s new leadership would focus on ensuring any trade deal serves the best interests of its workers and businesses.
Finance Minister Francois-Philippe Champagne echoed this sentiment on X, noting that canceling the tax will help Canada move forward with job creation and economic growth.
Just days earlier, US President Donald Trump had strongly opposed the tax, calling it a “direct and blatant attack” on the United States and threatening to pull out of all trade talks with Canada. He also warned of new tariffs on Canadian exports within a week. US Commerce Secretary Howard Lutnick praised Canada’s reversal, stating that the tax would have derailed any potential trade deal.
Tensions between Ottawa and Washington have been rising since February, when Trump imposed a 25% tariff on Canadian goods shortly after returning to office. Although Canada responded with its own tariffs, Trump temporarily lifted his measures and signaled interest in individual trade agreements that benefit US businesses.
Trump has previously accused Canada of exploiting US trade policies and even joked that the country should become the 51st US state. These remarks galvanized Canada’s Liberal Party and Carney’s election campaign. Upon taking office in March, Carney firmly rejected any integration with the US, declaring that Canada “will never, ever, in any way, shape, or form, be part of the United States.”
Canada remains the US’s second-largest trading partner, after Mexico, and is the top importer of American goods. In 2024, Canada bought $349 billion in US products and exported $412 billion to the US, according to the US Census Bureau.
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