Canadian Prime Minister Mark Carney announced on Sunday that trade discussions with the United States are back on track after Canada decided to drop its planned tax on U.S. technology companies. This decision came after a phone call between Carney and U.S. President Donald Trump, where they agreed to resume negotiations.
The digital services tax was set to impose a 3% levy on revenue earned by companies like Amazon, Google, Meta, Uber, and Airbnb from Canadian users. This tax was controversial and had been criticized by Trump, who labeled it a "direct and blatant attack on our country." The Canadian government had initially planned to implement this tax on Monday, but in light of the trade talks, they chose to retract it.
Carney’s statement emphasized that this move would help advance discussions toward a new economic and security relationship with the U.S. He mentioned that the July 21, 2025, timeline set during the recent G7 Leaders’ Summit in Kananaskis would now be achievable.
The backdrop to this decision is a fraught trade relationship between the U.S. and Canada, which has seen ups and downs since Trump took office. The U.S. has been pushing for a renegotiation of tariffs imposed on Canadian goods, which have been a point of contention.
Experts view Carney’s retreat on the digital services tax as a significant win for Trump and U.S. tech companies. Political science professor Daniel Béland from McGill University noted that this move made Carney appear vulnerable to Trump’s pressures, suggesting that it was a strategic choice to facilitate further negotiations.
Finance Minister François-Philippe Champagne echoed this sentiment, stating that rescinding the tax would pave the way for vital progress in negotiations with the U.S. The relationship between the two countries has been rocky, with Trump frequently making critical remarks about Canada, including suggesting it could be absorbed into the U.S.
As the trade talks continue, both sides are hopeful that a resolution can be reached that benefits their economies while easing tensions.