The United States resumed trade negotiations with Canada Monday morning, after the federal government scrapped its tax targeting large technology firms.
Prime Minister Mark Carney said he spoke with U.S. President Donald Trump on the phone Sunday evening. He said they decided to continue with negotiations, with the previously agreed-upon July 21 deadline still in mind.
Carney said that the decision to remove the digital services tax (DST) “is part of a bigger negotiation” with the U.S.
“It is something we expected, in the broader sense, that would be part of a broader deal,” Carney told reporters Monday afternoon.
He said it “doesn’t make sense” to collect the tax now and have to remit it at a later date.
Canada and U.S. restarted negotiations Monday morning, Carney says
White House Press Secretary Karoline Leavitt said the prime minister “caved” to Trump.
“President Trump knows how to negotiate,” said Leavitt. “It was a mistake for Canada to vow to implement that tax that would have hurt our tech companies here in the United States.”
Trump said Friday he was ending all U.S. trade discussions with Canada because of the DST, which would have seen companies like Amazon, Google, Meta, Uber and Airbnb pay three per cent on revenues from Canadian users.
With tax collection set to begin Monday, the policy would have left U.S. companies with a $2-billion US retroactive bill due at the end of the month.
Despite the move, Canada is still in active discussions with G7 allies to introduce an international tax, with Finance Minister François-Philippe Champagne leading that work, the PMO said.
‘Canada caved’ on digital services tax, says White House spokesperson
U.S. Ambassador to Canada Pete Hoekstra told CBC’s Power & Politics that the DST was a “red line” for the U.S.
The tax caused Canada to “move from the front of the line to the back of the line” in Trump’s negotiations with countries, but that Canada is now “back at the front of the line,” he said.
Hoekstra said he spoke to officials from both countries over the weekend about meeting the July 21 deadline.
“I think both sides are optimistic that they can get to an agreement within that time frame,” he said. “There’s always something that can sidetrack it, but they both want to get to an agreement.”
U.S. Commerce Secretary Howard Lutnick shared a statement on social media on Monday morning praising Canada’s decision to scrap the tax.
“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,” he wrote on X.
As recently as two days ago, the finance minister insisted the Digital Services Tax would proceed. Then the Prime Minister put his elbows down and cancelled the tax at the 11th hour. <br> <br>The tax is gone for good. In exchange, the Prime Minister should insist that the U.S.…
Conservative Leader Pierre Poilievre said on social media Monday that Carney put his “elbows down” by cancelling the tax “at the 11th hour.”
He said that the prime minister should insist the U.S. immediately rescind softwood lumber tariffs in exchange.
“We need to make gains for our workers in these talks,” Poilievre said on X.
