Canada has officially rescinded its planned Digital Services Tax (DST) just hours before it was scheduled to come into force, paving the way for the resumption of trade negotiations with the United States. The tax, originally announced in 2020, would have imposed a 3% levy on digital revenues exceeding C\$20 million, targeting major U.S. technology companies such as Amazon, Apple, Meta, and Alphabet. It also included retroactive provisions reaching back to 2022.
The Canadian government’s decision was confirmed on June 30, 2025, the same day the DST was set to take effect. Finance Minister François-Philippe Champagne explained that the move is intended to facilitate progress in securing a broader economic and security agreement with the United States. Prime Minister Mark Carney reinforced this strategy, stating that Canada aims to finalize the deal by July 21, a target mutually agreed upon during the recent G7 summit in Kananaskis.
The tax had been a significant point of contention between the two nations, leading to a breakdown in discussions last week. U.S. President Donald Trump described the tax as discriminatory and warned of retaliatory tariffs on Canadian exports if the measure proceeded. Canada, although previously spared from Trump’s sweeping April tariffs, is still facing substantial U.S. duties on steel and aluminum.
With the DST now off the table, trade negotiations have resumed, and market reactions have been largely positive. Asian stock futures rose following the announcement, and the U.S. dollar saw a slight easing. Canada remains a key trade partner for the United States, with bilateral goods exchange reaching over US\$760 billion in 2024.
In addition to revoking the DST, the Canadian government plans to introduce legislation to repeal the law entirely, canceling all expected collections and enforcement measures. This step aligns with Canada’s long-standing support for a multilateral digital tax regime under the Organisation for Economic Co-operation and Development (OECD).
The latest development underscores the significant influence of U.S. economic leverage and reflects Canada’s commitment to maintaining a stable and cooperative trade environment. As both countries aim to reach a comprehensive agreement by the July deadline, the outcome could reshape key areas of cross-border cooperation, including digital commerce, labor, agriculture, and national security.