Canada will rescind a digital services tax – a way of taxing online companies – its government said on Sunday, in a bid to restart trade negotiations with the United States.
US President Donald Trump on Friday canceled trade talks between the two countries, blaming the tax that he called “a direct and blatant attack on our Country.”
In a statement Sunday night, the Canadian government said it was stepping back from the tax to help bring the countries back to the table.
“To support those negotiations, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” according to the statement.
“Consistent with this action, Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.”
CNN has reached out to the White House for comment.
Digital services taxes are a way for countries to tax online services, in contrast to taxes on physical products.
Trump has lumped DSTs into what he calls “non-tariff trade barriers,” ways for other countries to restrict competition within their borders – often, Trump says, at the expense of US companies.
The Canadian DST was set to take effect on Monday, retroactive to 2022. Canada’s plan to cancel the tax is a major win for Trump, who often says that other countries are “ripping off” the United States.
Canada and the US are major trading partners, but Trump upended that relationship soon after returning to office in January, threatening a tariff of at least 25% on all Canadian exports.
Since then, Trump has made a number of changes to his trade policy and to tariff rates, not just for Canadian goods but for imports from across the world. The whipsaw changes have stoked uncertainty in the US and abroad, prompting companies large and small to reconsider their plans for the rest of the year.
Nor are Trump’s tariff changes over: On July 9, a deadline for dozens of countries to avoid “reciprocal” tariffs unless they negotiate deals expires. While Trump could extend that deadline if he chose, it’s unclear yet if he will do so.
Canada is the top buyer of American goods, importing $349 billion worth last year, according to Department of Commerce data. Meanwhile, Canada shipped $413 billion worth of goods to the US last year, the third-highest source of foreign goods.
This is a developing story and will be updated.
CNN’s Elisabeth Buchwald contributed reporting.
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