Canada has withdrawn its planned digital services tax on large technology companies, including Meta Platforms Inc. and Alphabet Inc., in a strategic move aimed at restarting stalled trade negotiations with the United States.
The decision was confirmed by Canada’s Finance Minister Francois-Philippe Champagne, who stated in a post on Sunday that rescinding the digital services tax (DST) will enable both countries to make meaningful progress on a renewed trade framework.
“Rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Champagne said.
The digital tax, passed under the previous government led by former Prime Minister Justin Trudeau, had been set to take effect this week. It would have imposed a 3% levy on digital services revenues earned from Canadian users by technology companies generating more than C$20 million annually from such activities.
The measure was projected to cost multinational technology firms billions of dollars in new payments.
The suspension comes after U.S. President Donald Trump announced on Friday that he was terminating all trade discussions with Canada in direct response to the implementation of the digital tax. Trump also threatened to introduce new tariffs on Canadian goods within a week.
However, following high-level dialogue between President Trump and Canadian Prime Minister Mark Carney, both sides have agreed to resume negotiations, targeting a potential trade deal by July 21.
The Canadian dollar appreciated slightly following the announcement, reflecting renewed optimism over trade stability with the country’s largest trading partner. Approximately 75% of Canada’s exports flow to the U.S., including crude oil, vehicles, and agricultural commodities.
In return, Canada remains the largest buyer of American goods and services, with total U.S. exports to Canada reaching about $440 billion last year and imports at roughly $477 billion, based on U.S. government figures.
Canada’s finance department confirmed that all scheduled payments due under the DST framework, which would have begun Monday, have been suspended. In addition, the government will introduce legislation to repeal the digital tax entirely, aligning Canada’s position with broader international efforts to manage digital taxation through multilateral frameworks.
The repeal comes amid pressure from domestic business groups and policymakers who have consistently argued that the digital tax could increase the cost of online services for Canadian consumers and risk retaliatory measures from the U.S.
Others viewed the tax as a potential bargaining lever for Canada’s negotiating team as it seeks concessions from Washington on other trade fronts.
The renewed trade dialogue is expected to cover a range of sectors, with both administrations under pressure to secure an agreement that protects key industries and jobs. Canadian officials have indicated they will prioritize securing guarantees for automotive exports, energy shipments, and cross-border supply chains.
Analysts say that resolving the digital tax dispute removes a major obstacle that had threatened to derail talks at a time when Canada’s trade exposure to the U.S. remains significant. Trade experts expect both governments to intensify talks in the coming weeks to meet the July deadline and prevent additional tariff escalation.
Canada joins a list of countries reassessing unilateral digital taxes in favor of broader international agreements under the OECD framework. Several European countries continue to impose similar taxes, while the U.S. has consistently pushed for a coordinated global solution to prevent new barriers to trade.
As negotiations resume, market watchers will closely monitor currency movements, tariff developments, and the reaction of major technology companies, which have lobbied against national digital levies and supported a harmonized international approach instead.
