President Donald Trump threatened U.S.-Canada trade talks on Friday over the northern nation’s digital services tax, which required foreign and domestic large businesses such as Netflix, Amazon.com’s Prime Video, and Spotify to pay a levy of 3% on revenue earned from offering online services to users in Canada.
“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump noted in a Truth Social post.
“They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also,” continued the president. “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately.”
‘Canada is a very tough country to deal with.’
Canada — the top buyer of American goods, importing $349.4 billion last year, and 75.9% of whose total exports went to the U.S. — made abundantly clear that it wasn’t too attached to the tax, which the Parliamentary Budget Office estimated would increase federal government revenues by over $5.2 billion over five years.
Within hours of Trump’s post, the Department of Finance Canada announced that it was rescinding the digital services tax to advance broader trade negotiations with the United States.
Canadian Finance Minister François-Philippe Champagne noted that “rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.”
U.S. Commerce Secretary Howard Lutnick thanked Canada on Monday for removing the tax, noting that it was “intended to stifle American innovation and would have been a deal breaker for any trade deal with America.”
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“In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses,” said Canadian Prime Minister Mark Carney. “Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis.”
The Canadian Liberal Party under former Prime Minister Justin Trudeau first promised the tax ahead of the 2019 federal election, saying it would “make sure that multinational tech giants pay corporate tax on the revenue they generate in Canada,” even though critics indicated that Canadian consumers would end up paying the taxes.
The Digital Services Tax Act went into force on June 28, 2024, prompting condemnation stateside as well as an official complaint under the Canada-U.S.-Mexico Agreement from former U.S. Trade Representative Katherine Tai.
John Dickerman, vice president of the Washington, D.C.-based Business Council of Canada, suggested to Canadian state media days after Trump’s re-election that the tax was likely doomed.
“The first Trump administration … was very clear on digital services taxes. They believed that digital services taxes were a very clear indication that a country was specifically targeting the U.S. and targeting U.S. companies. It will be a ‘with us and against us’ scenario,” said Dickerman. “I think there will be very little room for negotiation on DST.”
Trump leaned on Canada to axe the tax just in the nick of time. The first payments were due on Monday and retroactive to 2022, meaning a number of American corporations were on the hook for billions of dollars.
The Canadian government indicated that Carney and Trump have agreed to resume negotiations “with a view towards agreeing on a deal by July 21, 2025.”
“Canada is a very tough country to deal with, I will say that,” Trump told Fox News’ “Sunday Morning Futures.” “Hopefully we’ll be fine with Canada. I love Canada. Frankly, Canada should be the 51st state.”
Blaze News has reached out to the White House for comment.
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