OTTAWA — Canada and the United States restarted trade talks on Monday after Prime Minister Mark Carney's government agreed to drop Canada's digital services tax.
U.S. President Donald Trump suspended negotiations with Canada over the tax on Friday, triggering a weekend of intense discussions between Canadian ministers and their U.S. counterparts.
On Sunday night, Carney called Trump, and shortly after Ottawa announced it was eliminating the tax.
White House economic adviser Kevin Hassett said Monday the U.S. would immediately restart trade talks with Canada. A spokeswoman for the Prime Minister's Office confirmed trade talks have resumed.
Hassett made the comments in an interview on Fox News, adding Trump asked Canada to drop the tax at the G7 meeting in Alberta earlier this month.
The tax would have hit large tech companies, including Amazon, Google, Meta, Uber and Airbnb, with a three per cent levy on revenue from Canadian users.
Canada's move to drop the tax came just as the first payment was about to come due. The initial payment was retroactive to 2022 and could have collectively cost American companies US$2 billion.
The last-minute change caused some confusion among companies that were in the process of paying the tax.
Tariq Nasir, a partner at EY Canada’s indirect tax practice, said some companies have given instructions to pay the tax, but the payments were not going through at the Canada Revenue Agency.
Companies that have made the payments are now wondering how to get that money back and how to account for the payments in their quarterly statements, due in the next month.
On Monday, business groups on both sides of the border praised the government for moving to eliminate the tax, while critics accused the government of capitulating to the U.S.
Bloc Québécois Leader Yves-François Blanchet said Carney campaigned during the election on finding a way out from under Trump's tariffs but has nothing to show for it so far.
In a social media post, Blanchet said Carney's government "made significant compromises on defence, borders and counter-tariffs, and now it is backtracking on a widely supported measure to protect culture, still with nothing to show for it — no gains or progress for Quebec and Canada, neither on tariffs nor on trade."
"This is deeply concerning," he said.
Interim NDP Leader Don Davies said the decision to end the digital services tax amounts to "pure caving in to Trump and his billionaire friends."
"Canada is a sovereign country with the right to make our own tax laws. Abandoning fair taxation of tech giants is unacceptable appeasement," Davies said in a social media post.
Davies said that, coupled with Carney's openness to Trump's "Golden Dome" missile defence plan and his sprint to meet the new five per cent NATO defence spending benchmark, "it’s looking more & more like Mr. Carney had his elbows up during the pre-game skate — only to drop them once the game started."
Conservative Leader Pierre Poilievre pointed out that Carney's decision came just days after Finance Minister François-Philippe Champagne said the tax would go ahead as planned.
"Then the Prime Minister put his elbows down and cancelled the tax at the 11th hour," Poilievre said in an online post.
He said in exchange for eliminating the tax, Carney should "insist that the U.S. immediately rescind softwood lumber tariffs. We need to make gains for our workers in these talks."
Entrepreneur Arlene Dickinson, who is a member of the government's Canada-U.S. relations advisory council, said in an online post that she understands the need for diplomacy and only those involved in the negotiations have the full picture.
Dickinson said she's still "disappointed to see the DST paused just hours after standing firmly behind it."
"Backing off so quickly sends a message, whether we intend it or not. And that message matters," she said.
"It matters to Canadian businesses competing in a digital economy that doesn’t always play fair. It matters to taxpayers who carry the burden when global players don’t. And it matters to those of us who believe that when Canada stands for something, we hold the line."
The Canadian Chamber of Commerce called the decision to drop the tax a "savvy" one.
"This tax would have fallen on Canadian consumers, businesses and investors in the form of higher costs and hurt our economy at a critical time," David Pierce, the chamber's vice-president of government relations, said in a media statement.
He said ending the tax "moves us one step closer to a renewed, reliable trade deal" with the United States.
Rick Tachuk, president of the American Chamber of Commerce in Canada, said the withdrawal of the tax was a "welcome" move by the Canadian government.
"This is a constructive decision that allows both countries to focus on strengthening their economic partnership. Businesses on both sides of the border rely on policies that support certainty, collaboration, and long-term growth," he said in a media statement.
Benjamin Bergen, president of the Council of Canadian Innovators, which represents the Canadian tech sector, said in a media statement his organization has supported the tax but the government's move to eliminate it was the right one.
He said the tax was a "necessary tool to ensure global technology giants contribute their fair share in Canada" and was "designed to level the playing field for homegrown firms operating in a rapidly evolving digital economy."
"With formal negotiations now stalled, rescinding the DST is a strategic move that we hope will help reset the path toward renewed dialogue with the United States," Bergen said.
This report by The Canadian Press was first published June 30, 2025.
Anja Karadeglija and David Baxter, The Canadian Press
