Canada Scraps Digital Tax Amid Tense Trade Talks with U.S.
Canada Scraps Digital Tax tech companies late Sunday, just hours before it was supposed to start. This was a big change. It looks like this is a strategic move to get trade talks with the United States back on track after they were put on hold because of the tax that caused a lot of controversy.
Mark Carney, the Prime Minister of Canada, and Donald Trump, the President of the United States, are likely to start talking about trade again soon. The finance ministry of Canada says that both sides want to reach a new deal by July 21. The two leaders had already agreed to reach a deal within 30 days of their G7 summit meeting in mid-June.
Tensions escalated last Friday when Trump called off the talks. He labeled Canada’s proposed digital tax a “blatant attack” on U.S. companies. On Sunday, he repeated his criticism and warned of potential new tariffs on Canadian goods within a week.
The scrapped tax plan would have imposed a 3% levy on revenue earned from Canadian users by large tech firms. It targeted companies making over $20 million annually in such revenue. The proposal included a retroactive clause, applying the tax from 2022, which could have cost these firms hundreds of millions.
Affected companies would have included Amazon, Meta, Google (Alphabet), and Apple.
Canada’s finance ministry confirmed it has stopped the tax collection, which was scheduled to begin Monday. Finance Minister François-Philippe Champagne plans to introduce a bill to fully repeal the Digital Services Tax Act.
“The DST was introduced in 2020 to ensure digital companies paid fair taxes on revenue from Canadian users,” said the ministry. “But Canada continues to prefer a multilateral agreement through global consensus.”
Market Reaction and Economic Outlook
After Canada scrapped the digital tax, stock index futures rose sharply. The news also lifted investor sentiment across Asian markets. The move provided short-term relief to financial markets and eased fears of a U.S.–Canada trade conflict.
Canada plays a vital role as a U.S. trade partner. Last year, it imported over $349 billion in American goods and exported $412 billion to the United States—making it the top buyer of U.S. exports.
Although Canada avoided broader tariffs earlier this year, it still faces 50% duties on steel and aluminum. If trade talks break down again, further tariffs remain a risk.
