Canada ditches digital tax after tariff threat from Trump
Canada scrapped a tax targeting U.S. tech companies after President Trump broke off trade talks and threatened to slap higher tariffs on Canadian imports.
The digital services tax, which would have affected tech giants like Google and Amazon, was set to take effect on Monday. But the Canadian government rescinded the levy at the last minute to appease Trump and avoid a more damaging fight with Canada’s largest trading partner.
Canada’s Finance Minister announced the move Sunday, saying the tax was being rescinded “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.” Canada said trade talks with the U.S. would resume in hopes of reaching a deal by July 21.
In a social media post on Friday, Trump had blasted the Canadian tax as “a direct and blatant attack on our country.” He threatened to respond with a new tariff on Canadian products within seven days.
Trump currently has set a 25% tax on Canadian imports not covered by the USMCA trade agreement which was negotiated during Trump’s first term in office, and a 50% tax on aluminum and steel imported from Canada.
Negotiating window
The brinkmanship comes as the Trump administration is racing to reach trade deals with other major trading partners before a self-imposed deadline of July 9, when higher tariffs on dozens of countries are set to go into effect.
Trump had paused those tariffs in April to allow for a 90-day negotiating window. The administration has sent mixed signals on whether that deadline might be pushed back.
“I don’t think I’ll need to,” Trump said in an interview taped Friday with Maria Bartiromo of Fox News Sunday Morning Futures, before adding that an extension would be “no big deal.”
Treasury Secretary Scott Bessent told Fox Business on Friday that trade deals with major trading partners could be wrapped up by Labor Day.
The stock market fell sharply in April when Trump first announced his double- and triple-digit tariffs on nearly everything the U.S. imports. The administration quickly backtracked on the highest import taxes, however, and stocks have since rebounded, on investors’ hopes that a more costly trade war might still be averted.
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