Canada abruptly scrapped its plan to enforce a new digital service tax on American tech firms — days after President Trump blasted the “foolish” move as a “direct and blatant attack” on the United States.
Canadian Prime Minister Mark Carney caved just hours before the new levy was slated to go into effect on Monday, as the country scrambles to revive stalled trade negotiations ahead of a looming July 21 deadline.
A fuming Trump had nixed the talks Friday after Canada said it was sticking with its plan to slap companies such as Amazon, Google, Meta, Uber and Airbnb — with a 3% levy on revenue from Canadian users.
The tax would have been applied retroactively, leaving the companies with a US $2 billion (CAN $2.72 billion) bill due at the end of the month.
Trump ripped the tax and quickly vowed to set a new tariff rate on Canadian goods within the next week, threatening to upend US-Canada relations once again.
“We have just been informed that Canada … 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 wrote on Truth Social Friday.
“They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also. 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. Thank you for your attention to this matter!” he added.
Trump, 79, later said he expected Canada to backtrack.
“Economically we have such power over Canada. We’d rather not use it,” Trump said in the Oval Office on Friday. “It’s not going to work out well for Canada. They were foolish to do it.”
Carney’s office has since revealed the PM spoke with Trump on Sunday night and agreed to halt the tax in a bid to resume talks.
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Finance Minister François-Philippe Champagne is bringing forward legislation to rescind the tax, according to Canada’s finance ministry statement.
“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.”
The breakdown in talks came after Trump and Carney met at the G7 summit in Alberta in mid-June.
Carney noted the leaders had agreed to wrap up a new economic deal within 30 days.
Trump has imposed 50% tariffs on steel and aluminum as well as 25% tariffs on autos. He is also charging a 10% tax on imports from most countries, though he could raise rates on July 9, after the 90-day negotiating period he set would expire.
Canada and Mexico face separate tariffs of as much as 25% that Trump put into place under the auspices of stopping fentanyl smuggling, though some products are still protected under the 2020 U.S.-Mexico-Canada Agreement signed during Trump’s first term.
With Post wires
