Post by : Jyoti Gupta

Photo:AP

WASHINGTON — Canadian Prime Minister Mark Carney has agreed to withdraw a proposed digital services tax on large US technology companies after direct pressure from US President Donald Trump, paving the way for the resumption of stalled trade negotiations between the two countries.

The tax, which would have imposed a 3% levy on the Canadian revenue of tech firms like Amazon, Google, Meta, and Apple, was set to take effect retroactively from January 2022. Officials estimated the move would have cost US companies over C$2 billion in the first year and raised C$5.9 billion over five years.

Speaking to reporters in Ottawa, Carney said the decision was “part of a bigger negotiation” and confirmed that formal trade talks between the two sides resumed Monday. “It is something we expected to be included in a broader deal,” he said.

Tensions escalated last week after President Trump denounced the tax as a “blatant attack” on American business interests and halted trade discussions. The White House confirmed that Carney reached out to Trump in a phone call on Sunday evening to say the tax would be dropped.

White House Press Secretary Karoline Leavitt called the development a “big victory” for US tech companies and workers. “President Trump knows how to negotiate. Every country needs a good relationship with the United States,” she said.

Canada’s Finance Minister François-Philippe Champagne also issued a statement confirming that the digital tax would be rescinded. He noted that Canada’s preference has always been for a multilateral agreement on taxing digital services.

However, the decision drew criticism at home. Conservative opposition leader Pierre Poilievre accused the prime minister of backing down at the “eleventh hour.” Referring to the Liberal Party’s campaign slogan, he wrote, “Carney put his elbows down.” He also urged Canada to demand the immediate removal of US tariffs on softwood lumber in return.

US Commerce Secretary Howard Lutnick expressed gratitude toward Canada in a social media post, calling the tax a threat to American innovation and a potential deal-breaker.

While many countries, including the UK and France, are implementing their digital taxes amid concerns about multinational tech firms avoiding taxes, this Canadian reversal highlights the complex balance between taxation and trade diplomacy.