The United States and Canada are set to restart trade negotiations following Canada’s decision to scrap its planned digital services tax, which had targeted major U.S. tech companies.
White House economic adviser Kevin Hassett confirmed on Fox News that talks would resume “immediately,” calling the move a direct result of President Trump’s pressure at the recent G7 summit. “It’s something they’ve studied, now they’ve agreed to, and for sure, that means we can get back to the negotiations,” Hassett said.
The Canadian government had been set to begin collecting the 3% tax on digital revenues earned from Canadian users on Monday. But in a late-night announcement Sunday, Canada’s finance ministry confirmed the tax would be shelved and legislation introduced to repeal the Digital Services Tax Act entirely.
The reversal clears the way for new negotiations aimed at reaching a bilateral economic deal by July 21, a target set by Prime Minister Mark Carney and President Trump during their meeting earlier this month in Alberta.
Business Groups Cheer Tax Reversal
U.S. Commerce Secretary Howard Lutnick praised Canada’s decision, calling the tax “a deal breaker” that would have stifled American innovation. “Thank you Canada,” he posted on X (formerly Twitter).
Markets responded positively to the news. Wall Street stocks hit record highs Monday morning, fueled by optimism that a U.S.-Canada trade deal could be in sight — and that similar breakthroughs with other trading partners may soon follow.
Canadian business groups also applauded the move. David Pierce of the Canadian Chamber of Commerce said the digital tax would have hurt consumers and investors alike, adding: “This decision brings us closer to a renewed, reliable trade relationship with the United States.”
Pressure From the U.S.
The proposed tax would have applied to digital revenue over $20 million per year and was set to be retroactive to 2022. Major American firms like Amazon, Meta, Google, and Apple would have been directly affected.
The Biden administration had previously requested dispute settlement consultations over the measure, arguing it violated Canada’s obligations under the U.S.-Mexico-Canada Agreement (USMCA).
Trump, meanwhile, reacted sharply to the tax last week, abruptly halting trade talks and threatening new tariffs on Canadian goods. Over the weekend, he reiterated his stance, warning that without a resolution, a new round of duties would be imposed within days.
U.S. Treasury Secretary Scott Bessent said on Bloomberg TV that “a flurry” of trade deals could come before a looming July 9 deadline — after which Trump’s previously announced tariffs, ranging from 11% to 50%, are set to automatically take effect. Bessent cautioned that extensions are unlikely, even for countries negotiating in good faith.
Canada Seeks Broader Agreement
In its statement, Canada said the digital tax had originally been introduced to address the fact that many global tech firms pay little or no tax on revenues generated from Canadian users. However, the government reiterated its long-held preference for a multilateral solution on digital taxation through international bodies like the OECD.
Finance Minister François-Philippe Champagne will now introduce legislation to repeal the Digital Services Tax Act in full.
Canada is America’s second-largest trading partner after Mexico and the top buyer of U.S. exports. In 2024, it purchased $349.4 billion worth of American goods and exported $412.7 billion to the U.S., according to U.S. Census Bureau data.
While Canada had been spared Trump’s sweeping April tariffs, its exports — especially steel and aluminum — still face 50% U.S. duties, an issue expected to be part of upcoming trade negotiations.
