Canada Drops Digital Services Tax at 11th Hour, Backing Down After Trump Terminated Trade Talks Over the Issue

Just hours before Canada’s new Digital Services Tax was set to go into effect, the Canadian government announced that it rescinded the levy “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”

Canada scrapped the Digital Services Tax after U.S. President Donald Trump on Friday had blasted Canada’s 3% Digital Services Tax as “direct and blatant attack on our Country.” Trump, in a post on social media, said that because of the “egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.”

Late Sunday (June 29), the Department of Finance Canada announced the termination of the Digital Services Tax, which would have imposed a 3% surcharge on streaming services, online marketplaces, social media services and other digital services. Canada’s government had been set to start collecting revenue from the tax on Monday, June 30; that will now be halted. François-Philippe Champagne, Canada’s Minister of Finance and National Revenue, will soon bring forward legislation to rescind the Digital Services Tax Act, according to the department.

Canadian Prime Minister Mark Carney and Trump “have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025,” according to the Department of Finance Canada.

Canada’s Digital Services Tax, announced in 2020, was adopted “to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians,” according to the government. The tax would have required affected companies, predominantly big U.S. technology firms, to pay up to $3 billion to the Canadian government, including retroactive charges dating back to 2022, according to the U.S.-based Computer & Communications Industry Association trade group.

Carney said in a statement issued Sunday, “In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses. 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.”

Pictured above: Canadian Prime Minister Mark Carney and President Donald Trump at the Kananaskis Country Golf Course during the G7 Leaders’ Summit on June 16, 2025, in Kananaskis, Alberta, Canada