Canada Halts Digital Services Tax to Revive Trade Talks with U.S.

Canada has decided to scrap its digital services tax aimed at U.S. technology companies to revive stalled trade negotiations with the U.S. Prime Minister Mark Carney will work with Donald Trump towards a new trade agreement. The tax, which could have heavily impacted major tech firms, was scheduled for collection starting Monday.

In a significant move to foster smoother trade relations, Canada has scrapped its digital services tax targeting large U.S. tech firms. The tax's elimination aims to rekindle negotiations between Canadian Prime Minister Mark Carney and U.S. President Donald Trump, with hopes of reaching a trade agreement by July 21.

The proposed tax had been set to impose a 3% levy on digital service revenues from Canadian users exceeding $20 million, affecting giants like Amazon, Meta, Google, and Apple. Its removal was instrumental in renewing optimism in the market, sending Wall Street futures to record highs.

With Canada being the U.S.'s second-largest trading partner, the digital tax threat raised significant concerns. U.S. Commerce Secretary Howard Lutnick lauded Canada's decision as it avoided potential tariffs on Canadian goods. Talks continue to align on a multilateral agreement to better address digital service taxation going forward.

(With inputs from agencies.)