Canada’s decision to scrap its digital services tax has revived stalled trade talks with the US, just days after President Trump halted negotiations. This move could reshape economic ties between the two nations. Here’s what happened, why it matters, and how to stay informed on this critical development.

Canada’s Surprise Reversal

Late Sunday night, June 29, 2025 Canada’s finance ministry announced it would rescind its Digital Services Tax (DST), a 3% levy on US tech giants like Amazon, Google, and Apple, set to start June 30. The tax, retroactive to 2022, targeted digital revenue above $14.6 million from Canadian users. The decision came after President Donald Trump abruptly ended trade talks on June 27, calling the tax a “blatant attack” and threatening new tariffs on Canadian goods.

Nuzpost team was catching up with a user in Toronto who said the news sparked relief among local businesses worried about a trade war—Canada is the US second-largest trading partner, after all.

Why the Tax Sparked Tension

Introduced in 2020, the DST aimed to ensure tech giants paid taxes on Canadian revenue, as many skirt traditional tax rules. Canada preferred a global tax agreement but enacted the DST to bridge the gap while negotiations dragged. US firms, facing billions in retroactive payments, lobbied hard against it, and Trump’s Friday Truth Social post vowed to “terminate ALL trade discussions” unless it was dropped.

Canadian Chamber of Commerce CEO Candace Laing called the tax “self-defeating,” warning it could raise costs for consumers. I’ve seen small businesses in my area struggle with rising costs—adding a tax like this could’ve hit their bottom line hard.

What the Reversal Means

  • Trade talks back on track: Prime Minister Mark Carney and Trump agreed to resume negotiations, targeting a deal by July 21, 2025, as set at the G7 Summit in Kananaskis.
  • No tax collection: The June 30 tax rollout is halted, and Finance Minister François-Philippe Champagne will introduce legislation to repeal the DST Act.
  • Economic relief: Dropping the tax avoids Trump’s threatened tariffs, which could’ve hit Canadian exports like oil, cars, and lumber—vital for jobs.
  • Global precedent: Canada’s move may pressure other nations with similar taxes, like France, to rethink their policies amid US trade pushback.

The decision has calmed nerves. A local exporter I know was sweating over potential tariffs that could’ve spiked prices for his US clients. Now, there’s hope for a smoother trade deal.

While businesses cheer, some Canadians feel the government caved too quickly. Social media posts show frustration, with one user saying, “Carney folded in 48 hours—where’s our backbone?” Others see it as pragmatic, avoiding a costly trade spat.

The July 21 deadline looms, with complex talks on economic and security ties ahead. If no deal is reached, Trump’s tariff threat could resurface. For now, both sides seem eager to reset, with Carney’s office emphasizing jobs and prosperity.