Canada Reacts Following Trump's Suspension of Trade Discussions over Digital Services Taxation
In a significant turn of events, the United States and Canada have resumed trade negotiations after a brief pause, following Canada's decision to rescind its digital services tax (DST) on technology companies.
The DST, which came into effect last June, was intended to generate approximately $2 billion in revenue from large tech companies like Amazon, Meta, and Google. However, President Donald Trump called the tax a "direct and blatant attack" on the U.S. and terminated all trade discussions with Canada over it.
In response to Trump's announcement, the Canadian government maintained a firm but cooperative stance, affirming its intention to continue negotiations. Prime Minister Mark Carney emphasised the importance of protecting Canadian workers and businesses, while the Business Council of Canada warned that a unilateral DST could harm the economic relationship with the U.S.
Following a series of complex negotiations, Canada officially rescinded the DST on June 30, 2025, anticipating a comprehensive trade deal with the U.S. This move facilitated the resumption of trade talks, with Carney and Trump agreeing to restart negotiations with the goal of reaching an agreement by July 21, 2025, following timelines set at the recent G7 Leaders' Summit in Kananaskis.
Trump lifted his threat of further tariffs on Canada for the time being, while Carney stated that the rescinding of the DST and resumption of talks were positive steps towards a mutually beneficial economic and security partnership.
Frank McKenna, a former Canadian ambassador to the U.S., described the situation as complex, noting that Trump's decision to end trade talks with Canada reveals the intricacies involved. The DST will not affect the recent G7 agreement that removed the section 899 "revenge tax" proposal from Trump's tax bill, according to the Canadian Finance Department.
As the trade negotiations progress, it remains to be seen whether a proposal to eliminate the DST in exchange for an elimination of tariffs from the United States, as suggested by Goldy Hyder, president and CEO of the Business Council of Canada, will be tabled. McKenna, currently the chairman of Brookfield Corp. and deputy chair of TD Securities, will likely continue to play a key role in these discussions.
- The digital services tax (DST) on technology companies, initially implemented to generate approximately $2 billion in revenue, was rescinded by Canada in June 2025, paving the way for resumed trade negotiations with the United States.
- The Business Council of Canada has suggested a potential proposal to eliminate the DST in exchange for an elimination of tariffs from the United States during the ongoing trade negotiations.
- Despite the complexities involved due to President Trump's policy-and-legislation decisions, the recent resumption of trade talks between the United States and Canada is considered a significant step towards a mutually beneficial economic and security partnership.
