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The Canadian government is withdrawing its proposed digital services tax after President Trump said on Friday that he would withdraw from trade talks over the “egregious” tax.
With the removal of the tax, the US and Canada remain on course to reach a trade deal by 21 July.
“In our negotiations on a new economic and security relationship between Canada and the United States, 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,” Canadian Prime Minister Mark Carney said in a statement.
“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis.”
Canada’s Digital Services Tax was due to go into effect at the end of this month and would have levied a 3% tax on revenue that tech companies earn from digital services provided to Canadians. It would also have been retroactive until June 2022, meaning US tech companies would have faced a $2 billion bill.
After announcing his withdrawal from the trade talks, President Trump said he would notify the Canadian government of the new tariff rate the US would charge within seven days.
The Trump administration has already imposed a 25% tariff on Canadian products entering the US, with some exceptions.
“We have all the cards. We do a lot of business with Canada,” President Trump said.
“They do most of their business with us. When you have that circumstance, you treat people better.”
