U.S. President Donald Trump broke off trade negotiations over Canada's digital services tax on Friday. Now, trade talks are expected to advance.Leah Millis/Reuters
The federal government says it has decided to rescind a digital services tax that led U.S. President Donald Trump to break off negotiations aimed at ending the damaging trade war between the United States and Canada.
In a late Sunday announcement, Prime Minister Mark Carney’s government said talks with the Trump administration would resume now that Canada has repealed the levy, which applied to U.S. tech giants such as Amazon, Google parent Alphabet, Meta, Uber and Airbnb.
Mr. Trump on Friday had announced the United States was “terminating all discussions on trade with Canada” in response to the digital services tax. First payments under the levy were due June 30 and the initial bill faced by big U.S. companies was expected to exceed US$2-billion, retroactive to 2022.
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“Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025,” the Canadian government said in a statement Sunday.
The digital services tax would have imposed a 3-per-cent levy on Canadian revenue from digital services exceeding $20-million earned by companies with at least $1.1-billion in global revenue. This would have included revenue from search engines, social-media platforms and online marketplaces.
The government’s move came on the same day Fox News ran a pre-recorded interview with Mr. Trump in which he criticized the DST.
Mr. Carney and Mr. Trump agreed earlier this month at the G7 summit in Kananaskis, Alta., to negotiate an economic and security deal within 30 days.
The deadline raised expectations that Canada might be able to eliminate or reduce the series of tariffs the Trump administration has imposed on Canada this year. The G7 meeting’s conclusion also suggested that relations between Mr. Trump and Mr. Carney were moving in a positive direction and that a quick deal was possible.
But that tone has shifted sharply in recent days, with Mr. Trump abruptly announcing Friday that he was ending those talks.
In Sunday’s interview, Mr. Trump also criticized Canada’s supply-management system, which strictly controls imports of eggs, dairy and poultry to protect domestic producers. But he said the “egregious” DST was the reason he was “terminating” trade discussions with Canada.
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The Parliamentary Budget Officer has previously estimated that the DST would bring in about $1.2-billion per year if implemented. Last year’s federal budget provided a lower estimate, saying it would bring in $2.3-billion in 2024-25, covering the 2022, 2023 and 2024 taxation years, and then $900-million in each of the following four years.
A 2024 report by the U.S.-based Tax Foundation said at the time that 18 countries in addition to Canada have implemented some form of DST, including Austria, France, India and Britain.
The report said that about half of all European countries have either announced, proposed or implemented a DST.
Canadian business groups, including the Business Council of Canada, have long warned that the unilateral implementation of a DST could risk undermining Canada’s economic relationship with the U.S.
Last month, the U.S. and Britain announced a trade deal related to a range of products. But Britain’s 2-per-cent DST was not affected.
In a statement at the time, U.S. Trade Representative Jamieson Greer said the U.S. “is disappointed that Britain was unwilling to agree to fully address its discriminatory Digital Services Tax.”