Image Source: Agencies

June 30, 2025: Canada scrapped its digital services tax targeting US technology firms late on Sunday, just hours before it was due to take effect, in a bid to advance stalled trade negotiations with the United States.
Canadian Prime Minister Mark Carney and US President Donald Trump will resume trade negotiations in order to agree on a deal by July 21, Canada's finance ministry said in a statement.
Trump abruptly called off trade talks on Friday over the tax targeting US technology firms, saying that it was a “blatant attack.”
He reiterated what he said on Sunday, promising to set a new tariff rate on Canadian goods within the next week. This was a threat to bring relations between the United States and Canada back to their previous state of relative calm. After the two leaders met at the G7 in the middle of June, Carney said they had agreed to finish a new economic agreement in 30 days. The trade talks then broke down. The planned digital tax in Canada was 3% of a company's digital services revenue above USD 20 million per calendar year, with payments retroactive to 2022. It would have impacted US technology firms, including Amazon, Meta, Alphabet's Google and Apple, among others.
According to a statement from Canada's finance ministry, collection will be stopped on Monday and Finance Minister François-Philippe Champagne will introduce legislation to repeal the Digital Services Tax Act. “The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians,” the statement said.
“Canada’s preference has always been a multilateral agreement related to digital services taxation.”
Canada is the second-largest US trading partner after Mexico, and the largest buyer of US exports. It bought USD 349.4 billion of US goods last year and exported USD 412.7 billion to the US, according to US Census Bureau data.
In 2024, the Biden administration requested consultations on trade dispute settlement regarding the tax, claiming that it was incompatible with Canada's obligations under the North American trade deal. Canada escaped the extensive tariffs that Trump imposed in April, but it is subject to 50% duties on steel and aluminum.