 "Canadian Prime Minister Mark Carney walks with US President Donald Trump. AP")
The White House has claimed that Canada’s decision to resume trade talks with the US came after Prime Minister Mark Carney “caved” to the Trump administration’s demands. The Canadian government scrapped its digital services tax on the US hours before it was set to go into effect on Monday, following which trade talks between the two countries continued.
“It’s very simple. Prime Minister Carney and Canada caved to President [Donald] Trump and the United States of America,” press secretary Karoline Leavitt said, adding, “The president made his position quite clear to the prime minister and the prime minister called the president last night to let the president know that he would be dropping that tax.”
Canada’s finance ministry said late on Sunday that Carney and Trump would resume trade negotiations in order to agree on a deal by July 21.
“Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” US Commerce Secretary Howard Lutnick responded in a post on X.
Trump abruptly called off trade talks with Canada last week over Ottawa‘s digital services tax, saying it was a “blatant attack.” He reiterated this on Sunday, pledging to set a new tariff rate on Canadian goods within the next week, which threatened to push US-Canada relations back into chaos after a period of relative calm.
What was the digital service tax?
Ottawa introduced the digital service tax in 2020 on big US-based tech companies like Meta, Amazon, Google parent Alphabet, Uber and Airbnb. The levy was designed to charge American companies from the revenues they generated from Canadians.
The Digital Services Tax Act (DSTA) officially came into effect last year, with Canada imposing a 3 per cent tax on digital service revenues generated from Canadian users, even if companies have no physical presence in the country. The first payment of the tax was due on Monday.
The tax was applied to various digital services, including online marketplaces, social media platforms, digital advertising, and the sale or licensing of user data. It imposed a 3 per cent levy on revenue from Canadian users that exceeds $20 million in a calendar year.
Impact Shorts
View AllUS-Canada trade tensions
Canada was one of the first countries to face Trump’s tariff fury earlier this year. The country currently faces tariffs of 50 per cent on steel and aluminium exported to its largest trading partner and a 25 per cent tax on cars, as well as blanket tariffs on all other goods.
Canada is the second-largest U.S. trading partner after Mexico, and the largest buyer of U.S. exports. It bought $349.4 billion of U.S. goods last year and exported $412.7 billion to the US, according to US Census Bureau data.
With inputs from agencies