The fast-paced tariff negotiations between Canada and the United States are once again taking tumbles. On June 27, US President Donald Trump announced that he was suspending all trade talks in response to Canada’s introduction of a digital services tax (DST). He had insisted that the resumption of negotiations would be conditional on the repeal of the tax.
As of the 27th, the Canadian government had been confident that DST would be implemented as scheduled, but on the 30th they made a complete about-face and announced that they would resume negotiations with the US. This appears to mean that they have shelved the introduction of DST.
The DST would impose a 3% tax on revenue earned in Canada on American IT companies, including Amazon, Google, Meta, and Uber, and was scheduled to come into effect on June 30. Since the tax would be retroactive to 2022, American companies were required to pay approximately $2 billion in taxes by the end of June.
DST was enacted by the previous Trudeau administration in 2021. Conflict between the United States and Canada over DST predates the Trump administration, and the ambassador to Canada under the previous Biden administration also warned that implementing the tax would invite U.S. retaliation.
Canada and the US have been in talks over lifting tariffs on Canadian imports imposed by President Donald Trump. President Trump and Premier Mark Carney met on June 16 during the G7 summit in Alberta and agreed to try to reach some sort of agreement within 30 days.
“Canada depends on us for business,” Trump said. “If that’s the case, we should be more respectful.” In response, the Prime Minister’s office issued a statement saying, “The Canadian government will continue to engage in complex negotiations with the United States to protect the interests of Canadian workers and businesses.”
However, on the 30th, the US government announced that negotiations would resume, with President Trump and Prime Minister Carney describing the call as a “victory” in which Canada “gave in.”
Prime Minister Carney also told reporters that he had spoken with President Trump over the weekend but did not go into detail about whether DST was used as a negotiating tool.