US, Canada to resume trade talks after Ottawa drops digital tax

The United States and Canada will resume trade negotiations after Ottawa dropped its proposed digital services tax targeting U.S. tech companies. The decision came just hours before the tax was set to take effect, following pressure from U.S. President Donald Trump. White House officials said Canadian Prime Minister Mark Carney informed Trump of the reversal during a call on Sunday, describing it as a win for American technology firms.

Trump had previously warned Canada at the G7 summit that the tax would hinder trade talks. The 3 percent tax was to apply to revenues above $20 million from Canadian users, impacting tech giants like Amazon, Google, Meta, and Apple. The tax would have been retroactive to 2022, sparking backlash from U.S. officials who labeled it a threat to American innovation.

The cancellation has prompted renewed optimism in financial markets and among U.S. officials. Treasury Secretary Scott Bessent mentioned the potential for a wave of trade deals before a July 9 deadline, after which steep tariff increases could return. He warned that extensions for trade negotiations would depend solely on Trump’s decision.

Canadian Finance Minister Francois-Philippe Champagne announced plans to repeal the tax legislation. Canadian business leaders welcomed the move, arguing the tax would have raised costs for consumers and damaged the economy. However, critics, including opposition leader Pierre Poilievre, accused Prime Minister Carney of capitulating to U.S. demands, contradicting his campaign pledge to challenge Trump.

The renewed negotiations aim to conclude a trade agreement by July 21. Canada remains the second-largest U.S. trading partner, with bilateral trade exceeding $760 billion in 2024. Although Canada avoided Trump’s broad tariffs in April, it continues to face a 50 percent duty on steel and aluminum exports to the United States.

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