Credit: Envato Elements
In a move aimed at smoothing tensions and getting cross-border trade talks back on track, the Canadian government has announced it will withdraw its planned Digital Services Tax (DST) on major U.S. technology companies.
The decision—made just hours before the first payments were set to be collected—comes after U.S. President Donald Trump called off trade negotiations late last week, labeling the tax a “blatant attack” and warning of possible new tariffs on Canadian imports.
Finance Minister François-Philippe Champagne confirmed today that Canada will introduce legislation to officially cancel the DST and suspend any payment collections.
“Our goal has always been to reach a global agreement on fair digital taxation,” Champagne said. “This step reflects Canada’s commitment to international cooperation and a strong economic partnership with our closest trading partner.”
Why It Matters
The now-shelved DST would have applied a 3% tax on Canadian revenue earned by large tech firms like Google, Amazon, Meta, and Apple—companies generating more than $20 million annually from Canadian users. The plan, announced in 2020, was retroactive to 2022 and expected to bring in close to C$6 billion over five years.
But concerns have grown over how the tax might strain Canada-U.S. relations, especially as both sides work toward a new trade deal. Over 75% of Canada’s exports head to the U.S., totaling more than $400 billion each year, making smooth trade ties a top priority.
A Turning Point in Talks
U.S. officials had made it clear: no trade deal would move forward unless the tax was dropped. U.S. Commerce Secretary Howard Lutnick praised Canada’s decision today, calling it “a positive signal for future cooperation.”
Business leaders on both sides of the border are welcoming the news. Rick Tachuk, president of the American Chamber of Commerce in Canada, said,
“This is a constructive move that clears the way for real progress in trade talks.”
Looking Ahead
While the tax had its defenders, critics—including many Canadian businesses—warned it could lead to higher consumer costs and sour trade relations at a crucial time.
Michael Geist, a digital policy expert and law professor at the University of Ottawa, commented on the government’s pivot:
“The policy had become a lightning rod for controversy. Pausing it now is a practical decision to refocus on bigger priorities.”
Canada and the U.S. are now aiming to reach a new trade agreement by July 21, and this latest development could mark a turning point in what has been a bumpy road.
For now, businesses and consumers can breathe a little easier, as both nations recommit to dialogue over dispute.
