Canada resume US trade talks after withdrawing proposed tech tax

Canadian Prime Minister Mark Carney said today trade talks with US have resumed after Canada rescinded its plan to tax US technology firms.

US President Donald Trump said Saturday that he was suspending trade talks with Canada over its plans to continue with its tax on technology firms, which he called "a direct and blatant attack on our country".

The Canadian government said "in anticipation" of a trade deal "Canada would rescind" the Digital Serves Tax. The tax was set to go into effect tomorrow.

Carney and Trump spoke on the phone Sunday, and Carney’s office said they agreed to resume negotiations.

"Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis," Carney said in a statement.

Carney visited Trump in May at the White House, where he was polite but firm. Trump travelled to Canada for the G7 summit in Alberta, where Carney said that Canada and the US had set a 30-day deadline for trade talks.

Trump, in a post on his social media network last Friday, said Canada had informed the US that it was sticking to its plan to impose the digital services tax, which applies to Canadian and foreign businesses that engage with online users in Canada.

The digital services tax was due to hit companies including Amazon, Google, Meta, Uber and Airbnb with a 3% levy on revenue from Canadian users. It would have applied retroactively, leaving US companies with a US$2 billion (NZ$3.2 billion) bill due at the end of the month.

Daniel Béland, a political science professor at McGill University in Montreal, called Carney's retreat a "clear victory" for Trump.

"At some point this move might have become necessary in the context of Canada-US trade negotiations themselves but Prime Minister Carney acted now to appease President Trump and have him agree to simply resume these negotiations, which is a clear victory for both the White House and big tech," Béland said.

He said it makes Carney look vulnerable to President Trump’s outbursts.

"President Trump forced PM Carney to do exactly what big tech wanted. US tech executive will be very happy with this outcome," Béland said.

Canadian Finance Minister François-Philippe Champagne also spoke with US Treasury Secretary Scott Bessent today.

"Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress," Canadian Finance Minister François-Philippe Champagne said in a statement.

Trump’s announcement Friday was the latest swerve in the trade war he’s launched since taking office for a second term in January. Progress with Canada has been a roller coaster, starting with the US president poking at the nation’s northern neighbour and repeatedly suggesting it would be absorbed as a US state.

Canada and the US have been discussing easing a series of steep tariffs Trump imposed on goods from America’s neighbour.

Trump has imposed 50% tariffs on steel and aluminium as well as 25% tariffs on autos. He is also charging a 10% tax on imports from most countries, though he could raise rates on July 9, after the 90-day negotiating period he set would expire.

Canada and Mexico face separate tariffs of as much as 25% that Trump put into place under the auspices of stopping fentanyl smuggling, though some products are still protected under the 2020 US -Mexico-Canada Agreement signed during Trump’s first term.