Canada and U.S. Resume Trade Talks Amid Digital Tax Controversy
In a significant diplomatic development, Canadian Prime Minister Mark Carney announced the recommencement of trade discussions with the United States following Canada’s decision to withdraw its proposed tax on American tech giants.
This move comes after U.S. President Donald Trump halted trade negotiations, criticizing the tax as “a direct and blatant attack on our country.” The tax, which was set to take effect imminently, would have impacted major companies such as Amazon, Google, Meta, Uber, and Airbnb with a 3% levy on revenues generated from Canadian users.
Prime Minister Carney and President Trump engaged in a phone conversation on Sunday, resulting in an agreement to resume talks. Carney stated, “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.”
The digital services tax had the potential to retroactively affect U.S. companies with a substantial $2 billion bill due by the end of the month. Carney’s decision to withdraw the tax has been viewed as a strategic move to ensure the continuation of trade negotiations, with McGill University’s political science professor Daniel Béland noting that it was a “clear victory” for President Trump.
Béland commented, “At some point this move might have become necessary in the context of Canada-US trade negotiations themselves but Prime Minister Carney acted now to appease President Trump and have him agree to simply resume these negotiations, which is a clear victory for both the White House and big tech.”
Further discussions between Canadian Finance Minister François-Philippe Champagne and U.S. Treasury Secretary Scott Bessent also took place, emphasizing the importance of rescinding the tax to advance economic and security relations. Champagne remarked, “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress.”
The trade relationship between Canada and the U.S. has been fraught with challenges under Trump’s administration, notably with the introduction of substantial tariffs on steel, aluminum, and autos, alongside a 10% import tax that could see further increases. Despite these tensions, the U.S.-Mexico-Canada Agreement, signed during Trump’s initial term, continues to protect certain products.
As the two countries work towards resolving trade issues, the rescindment of the digital services tax marks a pivotal step in rebuilding their economic partnership.
Copyright 2025 NPR
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