Canada Scraps Digital Tax to Revive Stalled US Trade Negotiations
Canada Scraps Digital Tax to Revive Stalled US Trade Negotiations
Canada has announced the immediate rescission of its controversial digital services tax, a move aimed at jumpstarting critical trade negotiations with the United States. The decision comes just days after former US President Donald Trump abruptly halted discussions over the levy.
Canadian Prime Minister Mark Carney and former US President Donald Trump are set to resume trade talks, with a target date of July 21 for a potential agreement, according to a late Sunday statement from Canada’s finance ministry. Negotiations between the two major trading partners had been ongoing for months but hit a significant roadblock last Friday when Trump accused Canada of imposing unfair taxes on US tech companies, labeling it a ‘direct and blatant attack’.
Trump reiterated his strong stance on Sunday, threatening new tariffs on Canadian goods within the week. The now-scrapped tax was designed to levy 3% on digital services revenue earned from Canadian users, applying to firms with over $20 million in annual revenue, with payments retroactive to 2022. The first payments, due Monday, were estimated to cost major US tech giants like Alphabet, Amazon, and Meta approximately $3 billion.
Prime Minister Carney stated, ‘Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses,’ emphasizing that the tax reversal would ‘support a resumption of negotiations.’ Finance Minister François-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.’
Canada stands as the US’s second-largest trading partner globally, only after Mexico, and is the largest buyer of US exports. Last year, Canada imported $349 billion in US goods and exported $412 billion to the US, according to US Census Bureau data.
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