Canada abandoned its contentious digital services tax targeting major American technology firms hours before the levy was due to take effect, Reuters reported.
The dramatic move aims to salvage stalled trade negotiations with the United States after President Donald Trump abruptly terminated talks last Friday, condemning the tax as a “blatant attack” on American interests.
Canadian Finance Minister François-Philippe Champagne confirmed late Sunday that Monday’s planned tax collection would be halted, with legislation forthcoming to formally rescind the Digital Services Tax Act.
Canada’s Prime Minister Mark Carney and Trump have now agreed to resume negotiations, targeting a comprehensive trade agreement by 21 July. This development follows a tense 48-hour period during which Trump threatened to impose new tariffs on Canadian goods within a week, potentially reigniting bilateral tensions after a brief period of calm.
The breakthrough emerged from a Sunday phone conversation between the leaders, facilitating what Carney termed a “resumption of negotiations” towards the deadline established at June’s G7 summit in Kananaskis, Alberta.
This tax dispute unfolds against a backdrop of escalating bilateral trade tensions. Since February, Trump has imposed 50% tariffs on Canadian steel and aluminium, alongside 25% duties on automotive imports.
These measures form part of a wider trade war ignited when Trump invoked emergency powers to levy near-universal tariffs on Canadian goods in early 2025, citing concerns over border security and drug trafficking.
Though Canada retaliated with counter-tariffs on $29.8 billion worth of US goods in March, both nations have since sought to de-escalate through negotiated solutions.
