Canada to Rescind Digital Services Tax as U.S. Trade Talks Advance

OTTAWA – Canada will scrap its digital services tax as part of efforts to advance complex trade and security negotiations with the United States, officials announced Sunday (June 29).

This move comes after President Trump sharply criticized the tax on Friday (June 27), calling it a “direct and blatant attack on our country.”

“Based on this egregious tax, we are hereby terminating ALL discussions on trade with Canada, effective immediately,” Trump wrote in a post on Truth Social. “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.”

Finance Minister François-Philippe Champagne stated that the move will support negotiations on a new economic and security partnership between the two countries. Prime Minister Mark Carney and President Donald Trump have agreed to resume talks to reach a deal by July 21, 2025.

“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,” Carney said in a statement.

The digital services tax (DST), announced in 2020, was designed to ensure large technology companies paid taxes on revenue earned from Canadian users. Though Canada had preferred a multilateral solution, the DST was introduced amid delays in reaching a global agreement.

Champagne said legislation will soon be introduced to repeal the Digital Services Tax Act, and the government will halt the collection scheduled for June 30.

Following Canada’s announcement to repeal the DST, both sides agreed to resume negotiations, which had stalled in the wake of Trump’s remarks.

“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,” Champagne said.

Carney said Canada is prepared to take “as long as necessary, but no longer,” to finalize an agreement that protects Canadian interests. The new timeline was outlined earlier this month at the G7 Leaders’ Summit in Kananaskis, Alberta.

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