Recently, Canada announced its decision to withdraw the planned Digital Services Tax, aiming to pave the way for the resumption of suspended trade negotiations with the United States. This policy shift demonstrates that Canadian Prime Minister Mark Carney and U.S. President Donald Trump have intensified their discussions following the recent G7 summit, with hopes of reaching a new trade agreement in the near future.
According to a statement from Canadian Finance and National Revenue Minister François-Philippe Champagne, the taxation plan for online businesses has officially been canceled. This tax policy was set to take effect this Monday and would have been retroactive to 2022. Carney and Trump’s discussions resulted in both sides agreeing to restart negotiations in the coming weeks, aiming to foster a mutually beneficial agreement, while the White House has yet to respond.
Last Friday, Trump abruptly halted trade negotiations with Canada, labeling the digital services tax as Open and direct attacks against the United States, leading to a sharp deterioration in the economic relationship between the two countries. Trump has long regarded such taxes targeting tech companies as Non-tariff trade barriers, criticizing other countries for actions that exclude American companies from their local markets.
The United States and Canada are the closest trading partners in North America, with Canada importing goods worth 349 billion USD (approximately 2.72 trillion HKD) from the U.S. last year, while exports to the U.S. reached 413 billion USD (around 3.22 trillion HKD), making it the third-largest source of foreign goods for America. However, since Trump returned to the White House this January, he has threatened tariffs on Canada, even going so far as to declare a minimum tariff of 25% on all Canadian exports, which has significantly strained bilateral relations.
After taking office, Trump made significant adjustments to trade policy, raising tariffs on products from Canada and implementing similar measures against multiple countries. These changes have left companies uncertain about future cost structures and disrupted plans for the second half of the year for several businesses. Notably, July 9 marks the deadline for various countries to reach a tariff arrangement with the United States; if an agreement isn’t reached, the U.S. may impose retaliatory tariffs. It remains unclear whether Trump will extend the negotiation deadline.
