Canada Rescinds Digital Services Tax, Paving Way for Resumed US Trade Talks

Canada Rescinds Digital Services Tax, Paving Way for Resumed US Trade Talks

Canada holds a significant position as the second-largest US trading partner after Mexico and is the largest buyer of U.S. exports.

RMN News Trade Desk
June 30, 2025

OTTAWA – Canada has officially rescinded its planned digital services tax (DST), a move aimed at advancing trade negotiations with the United States. The decision comes days after US President Donald Trump called off talks in retaliation for the levy.

Canadian Prime Minister Mark Carney confirmed on Sunday (June 29) that he and President Trump have agreed to resume trade negotiations. This agreement will support the resumption of negotiations toward a July 21, 2025, timeline, which was initially set at this month’s G7 Leaders’ Summit in Kananaskis.

The Canadian levy on technology firms had been slated to go into effect on Monday. President Trump had previously stated on Friday that the tax, targeting “our American Technology Companies,” was “a direct and blatant attack on our Country”. The United States is home to some of the world’s largest technology companies, including Apple, Alphabet/Google, Amazon, and Meta.

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Purpose of the Tax and International Context: The Digital Services Tax (DST) was initially announced in 2020. Its design aimed to address the issue that many large technology companies operating in Canada might not otherwise pay tax on revenues generated from Canadians. Canada’s preference had always been to achieve a multilateral agreement related to digital services taxation.

Details of the Planned Tax: Canada’s planned digital tax was set at 3 percent of the digital services revenue a firm takes in from Canadian users, specifically on amounts above $20 million in a calendar year. Payments for this tax were intended to be retroactive to 2022. The levy was designed to apply to a range of services, including online marketplaces, social media platforms, digital advertising, and the sale or licensing of user data.

Reports suggest that Canada’s finance ministry has confirmed that the collection of the tax will be halted and that Finance Minister François-Philippe Champagne will introduce legislation to formally rescind the Digital Services Tax (DST) Act.

Trade Relations: Canada holds a significant position as the second-largest US trading partner after Mexico and is the largest buyer of U.S. exports. Last year, Canada purchased $349.4 billion of US goods and exported $412.7 billion to the US, according to US Census Bureau data. While Canada had previously avoided Trump’s broad tariffs imposed in April, it still faces 50 percent duties on steel and aluminum.