Donald Trump has reason to celebrate. In a stunningly rapid reversal, Ottawa has caved to his demands and rescinded a controversial tax aimed at American tech giants, ending a standoff that began on Friday.
鈥淐anada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,鈥 Finance Minister Fran莽ois-Philippe Champagne announced in a statement Sunday evening.
Following the announcement, Prime Minister Mark Carney and President Trump 鈥渉ave agreed that the parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.鈥
This marks a stunning and swift victory for Trump, who shocked markets on Friday with a post on his Truth Social platform. He declared that due to Canada鈥檚 decision to impose the Digital Services Tax on American tech companies, 鈥渨e are terminating ALL discussions on trade with Canada, effective immediately.鈥
For Trump, this capitulation provides a much needed political win at a critical moment. His presidency has been defined by an aggressive 鈥淎merica First鈥 trade policy, launching high-stakes trade wars with tariffs on goods from China and Europe. This confrontational style is now coming to a head, as a July 9 deadline approaches for nations around the world to finalize new trade deals with the U.S. or face a new wave of steep, 鈥渞eciprocal鈥 tariffs. Forcing a key ally like Canada to fold so quickly and publicly sends a powerful message to other negotiating partners.
The victory also helps Trump project strength on the home front after a bruising political showdown. His signature legislative priority, the 鈥淥ne Big Beautiful Bill,鈥 has faced intense criticism, even from former allies like Elon Musk, over its massive spending and deep cuts to popular programs. Having been forced to navigate a fractured Republican party to get the bill through Congress, securing a clear-cut win against a foreign government over an unpopular tech tax provides the administration with valuable positive momentum.
The confrontation centered on Canada鈥檚 Digital Services Tax. The measure imposes a 3% tax on the Canadian revenue of large digital companies, like Amazon, Google, and Meta. The tax has been in effect since last year, but the first payments are due this Monday, June 30.
鈥淭he June 30, 2025 collection will be halted,鈥 Champagne said in his statement.
The tax has been a major point of contention. While Canada is not the only country to implement such a measure, joining nations like France, Italy, and the United Kingdom, the U.S. government views these taxes as unfairly targeting American firms. In recent weeks, a coalition of Canadian and American business groups, along with U.S. tech industry organizations and American elected officials, had signed letters calling on the Canadian government to repeal or suspend the tax.
Prime Minister Mark Carney sought to frame the decision as a step toward a broader, more beneficial agreement. 鈥淚n our negotiations on a new economic and security relationship between Canada and the United States, Canada鈥檚 new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses,鈥 Carney said.