Canada canceled its planned 3% digital services tax on US tech firms to revive stalled trade talks between Prime Minister Mark Carney and President Donald Trump.

According to Canada’s finance ministry, Canada scrapped its 3% digital services tax on US tech firms on Sunday, 29 June 2025, just before its implementation, to revive stalled trade talks with Canadian Prime Minister Mark Carney and US President Donald Trump.

Canada and the US are negotiating to finalise a trade deal by 21 July 2025.

The trade talks are a response to Trump’s previously announced 25% tariff on Canadian imports on 30 January 2025 and a 10% baseline tariff on all imports, including Canada, on 2 April 2025.

In retaliation, on 31 March 2025, Canada implemented 25% tariffs on CAD 12.6 billion worth of steel and CAD 3 billion worth of aluminum products from the US.

Later, on 19 June 2025, Prime Minister Carney warned of more potential counter-tariffs on US steel and aluminum if a trade agreement with the US isn’t finalized within 30 days.

This comes in response to Trump’s announcement on 30 May 2025 to double tariffs on imported steel and aluminum from 25% to 50%, effective 4 June 2025.

On 16 June 2025, Carney announced that he and Trump had reached an agreement to aim for finalising a new economic and security deal by 21 July 2025.

However, Trump halted negotiations on Friday, 27 June, calling Canada’s proposed 3% digital services tax a “blatant attack on the US ” and saying Canada was a “very difficult country to TRADE with.”

On Sunday, 29 June, Trump also threatened new tariffs on Canadian goods within a week, risking renewed tensions. The same day, Trump said all trade talks would be stopped unless Canada drops “certain taxes,” referring to Canada’s 3% digital services tax.

“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven-day period, ” Trump posted on Truth Social. 

Canada proposed a 3% digital services tax on revenue generated from Canadian users by companies earning over CAD 20 million annually. This tax, retroactive to 2022, would primarily affect major US tech giants such as Google, Amazon, Meta, Google, and Apple.

The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians. Canada’s preference has always been a multilateral agreement related to digital services taxation. While Canada was working with international partners, including the United States, on a multilateral agreement that would replace national digital services taxes, the DST was enacted to address the aforementioned taxation gap.