Canada has rescinded its digital services tax in a bid to advance trade negotiations with the US, the country’s finance ministry has announced, days after Donald Trump ended trade talks amid a dispute over the levy.
Canadian prime minister Mark Carney and US president Donald Trump will resume trade negotiations with a view towards agreeing on a deal by 21 July, the ministry said in a statement late on Sunday.
The US has been negotiating a trade deal with Canada, one of its top two global trading partners, for months – but those negotiations appeared to hit a road block on Friday after Trump accused Canada of imposing unfair taxes on US technology companies in a “direct and blatant attack on our country”.
He reiterated his comments on Sunday, pledging to set a new tariff rate on Canadian goods within the next week.
The tax was set to be 3% of the digital services revenue a firm takes in from Canadian users above $20m in a calendar year, and payments would have been retroactive to 2022. The first payments on the tax were due on Monday and would have cost US tech companies, including Alphabet, Amazon and Meta, an estimated $3bn.
“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,” Carney said, adding that the move would “support a resumption of negotiations.”
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress,” said François-Philippe Champagne, the minister of finance.
Canada is the US’s second-largest trading partner after Mexico, and the largest buyer of US exports. It bought $349bn of US goods last year and exported $412bn to the US, according to US Census Bureau data.
