Canada halted the enforcement of its Digital Services Tax (DST) just a few hours before it was set to take effect on Monday in an effort to salvage trade discussions with the United States.
The move came after President Donald Trump abruptly terminated trade discussions on Friday, calling the tax a “blatant attack” on American technology companies. Trump also warned that he would increase the tariff rates against Canadian goods within the week if the tax were to proceed.
In response, Canada rescinded the DTS late Sunday night, hoping to keep negotiations on track. U.S. Commerce Secretary Howard Lutnick thanked Canada on X, stating that the tax would have been a “deal breaker” for any trade agreement with the United States.
Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America. https://t.co/b944wQ4cyn
— Howard Lutnick (@howardlutnick) June 30, 2025
Canadian Finance Minister François-Philippe Champagne will formally propose new legislation to repeal the Digital Services Tax Act (DSTA). President Donald Trump and Canadian Prime Minister Mark Carney are expected to resume negotiations and aim to reach an agreement by July 21.
Canada’s DTSA was initially proposed in 2019 under former Prime Minister Justin Trudeau and approved in June 2024. The policy would have imposed a 3% tax on the digital revenues generated from Canadian users by large technology firms, with global annual revenues surpassing $820 million and Canadian revenues over $14.7 million. The tax was retroactive, mandating payments on revenues dating back to 2022, and was set to be collected on Monday, June 30, 2025.
“The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians,” the Department of Finance Canada said in a statement. “Canada’s preference has always been a multilateral agreement related to digital services taxation.”
The tax would have affected major U.S. tech companies, including Amazon, Apple, Google and Meta. Estimates suggested that Canada’s digital tax could cost U.S. firms over $2 billion.
