Canada–U.S. Resume Trade Talks After Digital Tax Dropped

Photo:AP

Recently, Canada decided to cancel its digital services tax—a 3% fee aimed at big tech companies—just before it was supposed to start. This tax would have affected giants like Meta, Amazon, and Google, and was already causing concern in the United States.

U.S. President Donald Trump had paused trade talks and warned of tariffs if Canada didn't drop the tax. He called the tax a "direct and blatant attack" on American tech. In response, the White House praised Canada’s move and confirmed negotiations would resume immediately.

Canada’s Prime Minister Mark Carney and President Trump spoke by phone on June 29, and Canada agreed to formally end the tax while fast-tracking legislation to do so . Canada is aiming to complete a renewed trade deal by July 21, 2025, aligning with a timeline set at the recent G7 summit.

Why this is important:

• The digital tax was expected to bring in CA $7.2 billion over five years, but it also risked harming trade and costing U.S. jobs.

• Dropping the tax gives the U.S. a reason to restart talks, easing tensions and preventing new tariffs on Canadian goods.

• Now, both countries plan to work on a broader economic and security agreement, covering trade, technology, and environmental issues .

Responses from U.S. and Canada:

• U.S. Commerce Secretary Howard Lutnick called Canada’s action a “deal breaker avoided” and thanked Ottawa .

• Tech industry groups described the withdrawal as a win and are urging other nations to reconsider similar taxes.

• Some critics say Canada acted too quickly under pressure and worry about setting a precedent of backing down .

What’s next:

• Canada’s parliament will soon pass formal legislation to abolish the tax.

• Negotiators will aim to finalize a detailed trade deal by July 21.

• Other countries watching Canada’s move may revise their own digital service taxes 

This decision is a turning point in Canada–U.S. trade talks. By removing a contentious tax, both nations hope to build a stronger, more cooperative economic relationship. It’s a reminder of how fast negotiations can move—and how decisions about money and fairness are tied to bigger diplomatic goals.