Canada Caves: Digital Tax On U.S. Tech Scrapped After Trump Pressure

Canada ended a digital service tax that would have hit major American tech companies hard after President Donald Trump announced he was ending trade talks with the country over the levy.

Canada’s Department of Finance said Sunday that it would rescind its Digital Service Tax (DST) in “anticipation of a mutually beneficial comprehensive trade arrangement with the United States.” The reversal came after Trump said on Friday that he was “terminating” trade discussions. 

The tax, which was expected to take effect on Monday, was anticipated to have a significant impact on United States-based companies like Amazon, Google, Meta, and Apple. 

JULY 4 SALE: Get Six Months Of DW+ Free

“Canada’s new government is focused on building the strongest economy in the G7 and standing up for Canadian workers and businesses,” said Minister of Finance and National Revenue François-Philippe Champagne. “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.”

Earlier this month, Champagne said that the Digital Service Tax would be implemented despite opposition from the United States. He said on June 19 that the tax was “going ahead” as scheduled and would be applied. 

The digital service tax was enacted to require “foreign and domestic large businesses to pay tax on certain revenue earned from engaging with online users in Canada,” according to the Canadian government. The tax would have cost American businesses up to $2.3 billion annually, according to a study conducted by the Computer and Communications Industry Association. 

Canadian Prime Minister Mark Carney said Sunday that he and Trump had agreed to continue trade discussions with the hope of signing an agreement by July 21. 

The resumption of talks follows Trump’s social media berating of Canada on Friday. 

“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump posted on Truth Social. “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.”

Several other trade deadlines are looming, including a July 9 cutoff for the United States and the European Union to make a deal before 50% tariffs on European imports are imposed.