Canada has reversed its digital services tax following pressure from the Trump administration. Canada backs down on digital tax after President Trump threatened major tariffs on Canadian goods. The move clears the way for renewed trade negotiations between the two nations.
Prime Minister Mark Carney announced the decision late Sunday, halting the 3% levy on major tech firms. The tax, targeting companies like Google and Amazon, had angered US officials. Canada backs down on digital tax to prevent an escalating trade war.
Trump had abruptly ended trade talks last week, calling the tax unfair. He warned of retaliatory tariffs unless Canada scrapped the policy. Now, both sides will resume discussions, aiming for a deal by July 2025.
The US president had given Canada a seven-day deadline to respond. He accused Ottawa of copying EU policies that harm American businesses. Canada backs down on digital tax after realizing the economic risks of prolonged tensions.
Trump also criticized Canada’s high dairy tariffs, calling trade relations difficult. His tough stance pushed Carney to compromise, avoiding further disruptions. The two leaders met recently at the G7 summit but failed to resolve the dispute.
The US is Canada’s top trading partner, making cooperation essential. A prolonged clash could have hurt both economies. By withdrawing the tax, Canada hopes to secure a favorable trade agreement soon.
The digital levy was set to take effect June 30 but will now be canceled. Legislation is pending to fully repeal the measure. Analysts say this concession shows Canada’s reliance on US markets.
Negotiations will focus on broader trade terms, including tariffs and digital commerce. Trump wants better terms for US exporters, while Canada seeks stability. The coming weeks will test whether both sides can find common ground.
For now, Canada backs down on digital tax, easing immediate tensions. But long-term trade harmony remains uncertain as Trump keeps pressure on allies. The outcome could shape North American economic relations for years.
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