Canada has scrapped its digital services tax in an effort to advance trade negotiations with the United States, the country’s finance ministry announced, just days after Donald Trump suspended talks over the controversial levy.
Canadian Prime Minister Mark Carney and US President Donald Trump are set to resume negotiations, aiming to reach a deal by July 21, the ministry said in a statement issued late on Sunday.
Tensions escalated on Friday when Trump accused Canada of targeting American firms unfairly, announcing that he would impose new tariffs on Canadian goods within a week. The cancellation of the tax appears to have eased the immediate friction, allowing the two sides to return to the negotiating table.
The United States has been working towards a trade agreement with Canada—its second-largest trading partner globally—for several months. However, progress appeared to stall on Friday when Trump accused Canada of imposing unfair taxes on US tech firms, describing the move as a “direct and blatant attack on our country”.
The proposed tax would have imposed a 3 percent levy on digital services revenue earned from Canadian users above $20 million per calendar year. The payments, which were due to begin on Monday, would have applied retroactively from 2022 and were expected to cost US companies such as Alphabet, Amazon and Meta an estimated $3 billion.
“Canada’s new government will always be guided by the overall contribution of any agreement to the best interests of Canadian workers and businesses,” said Carney, adding that repealing the tax would “support a resumption of negotiations”.
François-Philippe Champagne, the finance minister, said the decision “will allow the negotiations of a new economic and security relationship with the United States to make vital progress”.
Canada is the United States’ second-largest trading partner after Mexico, and its biggest buyer of US exports. According to the US Census Bureau, Canada imported $349 billion worth of US goods last year and exported $412 billion to the US.