Canada Backs Down on Digital Tax After Trump Threatens Trade Talks
So here's what just happened, and it’s a major development in Canada-U.S. relations. Canada has officially rescinded its controversial digital services tax. This tax was set to take effect today—June 30, 2025—and would have retroactively charged some of the world’s biggest tech companies, like Amazon, Google, Meta, and Airbnb, a 3% levy on revenues earned from Canadian users dating all the way back to 2022. We’re talking about an expected $2 billion payout from these digital giants, mostly American.
But here’s the twist: the U.S. wasn’t having any of it. On Friday, former President Donald Trump, now seeking reelection and very much active on the political scene, abruptly called off all trade negotiations with Canada. He took to Truth Social and flat-out said the talks were dead unless Canada dropped the tax. He didn’t hold back, either—called Canada “nasty to deal with” in a Fox interview. Whether you love him or loathe him, when Trump talks trade, people listen.
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This tax has been years in the making. First proposed in 2020 and finally legislated in 2024, it was supposed to close what Canada saw as a loophole: big tech companies making a lot of money off Canadians without paying taxes in the country. The tax was only going to hit companies with over €750 million globally and more than $20 million in Canadian digital revenue. Still, it was heavily skewed toward U.S. firms—according to Congress, American companies would have borne 90% of the cost.
Critics south of the border were fuming, calling the tax retroactive and unfair. Even before Trump stepped in, warnings had been issued. The American Chamber of Commerce in Canada said this would be the breaking point—and they were right.
So what changed? Late Sunday night, after an urgent phone call between Prime Minister Mark Carney and President Trump, Canada pulled the plug. The tax is gone, and trade talks are officially back on track. Both sides have now agreed to work toward a new economic and security deal, with a deadline of July 21. That’s just a few weeks away.
This move reflects a big diplomatic gamble by Canada. They bet on pushing through a tax they believed was fair and overdue. But in the end, the risk of tanking trade talks with their largest trading partner proved too high. Whether this decision will strengthen Canada's negotiating hand—or make it seem like they backed down under pressure—remains to be seen.
What’s clear right now is that this issue struck a nerve. It wasn't just about money or policy—it was a power move, a test of wills, and a glimpse at how fast international diplomacy can change in the digital age.
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