Canada has 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 come into effect on Monday, as the country now scrambles to revive stalled trade negotiations ahead of a looming July 21 deadline.
A fuming Trump had nixed the trade talks on Friday after Canada said it was sticking with its plan to slap companies — including 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 $2 billion bill due in the US 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 on 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.
He 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 he spoke with Trump on Sunday night and agreed to halt the tax in a bid to resume talks.
Finance Minister François-Philippe Champagne is now 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 mid-June.
Carney noted they’d agreed to wrap up a new economic deal within 30 days.
With Post wires
