Canada scraps taxes on tech giants to save trade talks with Trump

The Canadian government is scrapping the Digital Services Tax on revenues from U.S. tech companies in a bid to get trade talks with President Donald Trump’s administration back on track, Canada’s finance ministry said Sunday night, after Trump pulled the plug on negotiations between the two neighbors on Friday amid dissatisfaction with the tech tax.

Canadian Prime Minister Mark Carney will resume trade talks with Trump, his office said, with the goal of reaching a new trade deal by July 21. It would end the trade war Trump has started against Canada, one of the U.S.'s largest trading partners.

On Friday, Trump abruptly ended intensive trade talks with the neighboring country over Canada's intention to push ahead with the controversial Digital Services Tax. Trump called the tech tax, which targets the revenues of American tech giants in Canada, "a direct and blatant attack on our country."

Retroactive effect

The Digital Services Tax was aimed at companies with at least $14.7 million in annual revenue in Canada, and at least $820 million in global revenue; in practice, this meant tech giants such as Amazon, Alphabet, Meta, Uber and Airbnb. The aim was to make multinationals pay “their fair share” of revenue they generate from Canadian users. The tax, introduced last year by Carney’s predecessor Justin Trudeau, was to be paid retroactively to 2022. The first payment had to be made by this Monday.

Instead, the Finance Ministry said Sunday night that it would halt tax collections and that Minister François-Philippe Champagne “will soon introduce legislation to repeal the Digital Services Tax Act.” Canadian business representatives have been pushing for the move in recent weeks to remove a roadblock to trade negotiations.

Other countries have also imposed digital services taxes that hit U.S. tech companies, including the U.K., France, Italy and Spain. It’s unclear to what extent Trump, who has close ties to tech bosses, will also make those taxes a stumbling block in trade negotiations.

Canada is the US’s second-largest trading partner, after Mexico, and the largest buyer of US exports. Last year, Canada exported US$412 billion worth of goods to its southern neighbour, more than three-quarters of the country’s total exports. Canada imported US$349 billion worth of US goods.