Canada withdraws taxes on American tech companies in pursuit of a trade agreement with Trump
In a significant development, Canada has decided to rescind its Digital Services Tax (DST) to pave the way for broader trade negotiations with the United States. This announcement was made by Canada’s Minister of Finance, François-Philippe Champagne, on June 29, 2025.
The DST, enacted in 2020, aimed to tax revenues generated by large tech companies operating in Canada that might otherwise avoid paying tax. However, it was intended as an interim solution, as Canada had preferred a multilateral approach to digital services taxation involving multiple countries, including the U.S.
The move to rescind the DST is aimed at supporting ongoing complex negotiations on a new economic and security partnership between the two nations, with a goal to finalize a comprehensive trade deal by July 21, 2025. The collection of the DST scheduled for June 30, 2025, will be halted, and legislation to formally repeal the Digital Services Tax Act will soon be introduced.
Prime Minister Carney and U.S. President Trump have agreed to resume negotiations with this new development in mind, focusing on a mutually beneficial trade arrangement that avoids tariffs and addresses taxation in a cooperative manner.
The trade talks are of utmost importance for both countries, given that Canada is the largest supplier of foreign steel and aluminum to the United States. The U.S. has imposed levies on imports of steel, aluminum, and autos, with the tariffs on these items recently doubled to 50 percent.
Canada has been spared some of the sweeping duties Trump has imposed on other countries, but it faces a separate tariff regime. If a bilateral trade deal is not reached in 30 days, Canada has announced it will adjust its 25 percent counter tariffs on U.S. steel and aluminum.
Prime Minister Carney stated that a good outcome in the talks would be to "stabilize the trading relationship with the United States" and "ready access to U.S. markets for Canadian companies" while "not having our hands tied in terms of our dealings with the rest of the world."
U.S. Treasury Secretary Scott Bessent expressed hope that Canada would halt the tax as a sign of goodwill. However, there was no immediate comment from the White House or President Trump regarding the rescission of the Digital Services Tax.
The rescission of the Digital Services Tax is expected to save U.S. tech firms an estimated Can$5.9 billion (U.S.$4.2 billion) over five years. The latest update on the trade talks between Canada and the United States is a promising step towards a comprehensive trade deal that benefits both nations and fosters a stable trading relationship.
- The decision to rescind Canada's Digital Services Tax (DST) is linked to the ongoing negotiations between Canada and the United States, as both nations aim to finalize a comprehensive economic and security partnership.
- The halting of the DST collection scheduled for June 30, 2025, and the intended introduction of legislation to formally repeal the Digital Services Tax Act, are strategic moves to support these complex trade negotiations and foster a stable trading relationship with the United States.
