Well, that was fast.
In a late Sunday news release, the Canadian Department of Finance announced it was rescinding the Digital Services Tax “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”
“Consistent with this action, Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.”
The Department added that the “June 30, 2025 collection will be halted” and the finance minister will advance legislation to rescind the Digital Services Tax Act.
In a Friday afternoon post on Truth Social, President Trump declared he was “terminating” trade talks with Canada “effective immediately.” The reason, he said, was that Canada had placed a “Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country.” He added that we will notify Canada within the next week “the Tariff that they will be paying to do business” with the U.S.
I reported on this story here.
The Canadian government first floated the idea of the DST in 2020 under then-Prime Minister Justin Trudeau. It was enacted in 2024 and would be applied retroactively to 2022.
The first payment to Ottawa — estimated at $7.2 billion — was scheduled for June 30.
The Canadians felt that large companies, regardless of where they were headquartered, should “pay a 3% tax on revenue earned from engaging with online users in Canada if they meet certain conditions.”
The tax would have hit U.S. technology giants hardest, including Meta, Apple, Google, Amazon, and Microsoft.
The DST did not originate in Canada. Several countries in Europe currently charge this tax. The Trump administration considers it a “non-tariff trade barrier” and is seeking to eliminate it in its final deals with those nations.
If Trump’s termination of trade talks “effective immediately” on Friday seemed sudden, it was because he had left the mid-June G7 summit with a distinctly different understanding of the status of the tax. He believed the U.S. and Canada had agreed on a 30-day grace period during which negotiations would continue. When the DST was presented as a fait accompli, Trump was angry and abruptly walked away from the table.
Canada’s quick capitulation proves that Trump’s take-no-prisoners strategy worked. That said, Canada is America’s second-largest trading partner (after Mexico), and a strong U.S.–Canada trade relationship is invaluable to both nations.
Canadian businessman Kevin O’Leary told Fox & Friends on Saturday that the DST “was bad policy then” — when first introduced under Trudeau, whom he refers to as the “idiot king” — “and it remains bad policy now.” He added some important perspective and context to the situation.
Trudeau was thrown out after he impoverished 25% of the Canadian population, wiped out GDP, [and] buried the country in debt because of one policy called Bill C-69 which doesn’t allow development of any energy … it’s a no pipeline bill. So revenues collapsed in Canada during his 10-year reign, and now [Prime Minister Mark] Carney has no income. … So, he’s trying to find any way he can to make income. This [the DST] is worth $7 billion to the Canadian economy, but obviously, it’s not going to work out the way he planned.Now, he [Carney] may just be testing it, but he doesn’t have a lot of options because Canada’s economy has been wiped out by the idiot king, and he’s got to fix it….Canada has the raw resources, the unlimited nat[ural] gas, unlimited oil, unlimited rare earths, unlimited minerals, and the U.S. is the largest market.So what, are we all idiots? Why do we have tariffs in either direction? There should be no tariffs whatsoever. We should bulk up and then fight off the Chinese.
Elizabeth writes commentary for Legal Insurrection and The Washington Examiner. She is an academy fellow at The Heritage Foundation. Please follow Elizabeth on LinkedIn or X.
CLICK HERE FOR FULL VERSION OF THIS STORY