Canada abolishes digital tax under Trump’s pressure, resumes trade talks

Succumbing to Trump's threats of halting trade talks and imposing new tariffs

Three-fourths of Canada’s exports go to the US; Canada is the top importer of US goods

Canada has abolished the digital services tax on tech companies like Meta Platforms and Alphabet Inc. to resume trade negotiations with the US. This came after Trump threatened to halt all trade talks and impose new tariffs on Canada within a week.

According to Bloomberg and Reuters on the 30th (local time), François-Philippe Champagne, the Minister of Finance, stated on social media late Sunday night (local time), "By abolishing the digital services tax, we will make significant progress in the negotiations."

Earlier, on the 27th, US President Trump declared that all trade talks with Canada would be halted as a retaliatory measure for the digital tax. He also threatened to impose new tariffs within a week.

President Trump and Canadian Prime Minister Mark Carney agreed to resume negotiations and work toward an agreement by July 21. Officials suggested that most likely, a deal could be completed by the Labor Day holiday on September 1. Following this news, the Canadian dollar strengthened.

About three-quarters of Canada’s exports go to the US, including raw materials such as oil, steel, and aluminum, as well as cars and trucks produced in Canada.

However, the US could also be at risk, since Canada is the largest importer of US products. According to US government data, last year the US exported about $440 billion worth of goods and services to Canada and imported $477 billion from Canada.

The first deadline for the Canadian digital tax was the 30th. The tax, passed last year under former Prime Minister Justin Trudeau's government, required American tech companies with annual digital service revenue from Canadian users exceeding 20 million Canadian dollars (about ₩19.8 billion) to pay a 3% tax on their revenues.

Several countries, including the United Kingdom, are implementing similar taxes, forcing US Big Tech firms to bear multi-billion dollar costs. The Canadian Ministry of Finance announced Monday that it would halt the collection due and submit a bill to fully abolish the digital tax.

After Trump's remarks, Canadian business leaders and politicians repeatedly urged the Carney government to abolish the digital tax, arguing for a long time that imposing this tax would increase digital service costs and provoke US retaliation. However, some argued that the digital tax could serve as a bargaining chip in negotiations with the US.

Jung-A Kim, guest reporter kja@hankyung.com