US, Canada to resume trade talks after Ottawa drops digital tax

OTTAWA/WASHINGTON – The United States will resume trade negotiations with Canada immediately after Ottawa scrapped its digital services tax targeting US technology firms, White House economic adviser Kevin Hassett said on June 30.

“Absolutely,” Mr Hassett said on Fox News Channel when asked about the talks restarting.

White House press secretary Karoline Leavitt told reporters that Canadian Prime Minister Mark Carney called US President Donald Trump on the evening of June 30 to tell him the tax was being dropped, calling it a big victory for US tech companies.

“Very simple. Prime Minister Carney in Canada caved to President Trump and the United States of America,” she said, crediting Mr Trump’s hardline negotiating style for the shift.

“President Trump knows... that every country on the planet needs to have good trade relationships with the United States, and it was a mistake for Canada to vow to implement that tax that would have hurt our tech companies here in the United States,” she said.

Mr Trump had asked Canada to take the tax off at the Group of Seven (G-7) meeting in Canada earlier in June, Mr Hassett said.

“It’s something that they’ve studied, now they’ve agreed to, and for sure, that means that we can get back to the negotiations.”

Canada halted its plans to begin collecting a new digital services tax targeting US technology firms just hours before this was due to start on June 30 in a bid to advance stalled trade negotiations with the US.

Canada’s Finance Ministry said late on June 29 that Mr Carney and Mr Trump would resume trade negotiations to agree on a deal by July 21.

“Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” US Commerce Secretary Howard Lutnick responded in a post on X.

Stocks hit record highs on Wall Street on June 30 morning as sentiment in the markets rose amid optimism about US trade negotiations with key partners, including Canada.

US Treasury Secretary Scott Bessent also struck an optimistic tone over the potential for “a flurry” of trade deals ahead of a July 9 deadline, after which 10 per cent US tariff rates on imports from many countries are set to snap back to Mr Trump’s April 2 announced rates of 11 per cent to 50 per cent.

But Mr Bessent, speaking on Bloomberg Television, warned that countries may not get extensions from that deadline, even if they are negotiating in good faith as he suggested previously.

Any extensions would be up to Mr Trump himself, Mr Bessent said.

Ms Leavitt said Mr Trump was meeting his trade team this week to set tariff rates for those countries that were not negotiating.

“He is going to set the rates for many of these countries if they don’t come to the table to negotiate in good faith, and he is meeting with his trade team this week to do that,” she said.

Mr Trump abruptly called off trade talks with Canada on June 27 over Ottawa’s digital services tax, saying it was a “blatant attack”.

He reiterated this on June 29, pledging to set a new tariff rate on Canadian goods within the next week, which threatened to push US-Canada relations back into chaos after a period of relative calm.

“We have countries that are negotiating in good faith, but they should be aware that if we can’t get across the line because they are being recalcitrant, then we could spring back to the April 2 levels,” Mr Bessent said. “I hope that won’t have to happen.”

Trade U-turn

Mr Trump and Mr Carney

met at a G-7 summit

, with the Canadian Prime Minister saying they had agreed to wrap up a new economic agreement within 30 days.

Canada’s planned digital tax was 3 per cent of the digital services revenue a firm takes in from Canadian users above US$20 million (S$25.4 million) in a calendar year, and payments were to be retroactive to 2022.

It would have impacted giant US technology firms, including Amazon.com, Meta, Alphabet’s Google and Apple.

The tax collection slated for June 30 will be halted, a statement from Canada’s Finance Ministry said.

Finance Minister Francois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax Act.

Canadian business groups applauded Mr Carney’s decision as well as the US Congress’ removal of a “revenge tax” provision from Republican tax legislation, known as 899.

“The decision to eliminate the DST makes sense. This tax would have fallen on Canadian consumers, businesses and investors in the form of higher costs and hurt our economy at a critical time,” said Mr David Pierce, vice-president of government relations at the Canadian Chamber of Commerce in a statement.

Some observers said Mr Carney’s decision ran counter to his campaign promises, however. Mr Carney’s Liberal party won an election in April pledging to stand up to Mr Trump.

“It feels like we’re standing down really quickly,” said Mr Vass Bednar, managing director of the Canadian Shield Institute for Public Policy, a think-tank.

Opposition Conservative Party leader Pierre Poilievre said Mr Carney needs to demand concessions from Mr Trump.

“Canadians need certainty that Liberals will put Canada First and defend Canadian sovereignty in these negotiations,” Mr Poilievre said on X.

Canada is the second-largest US trading partner after Mexico, and the largest buyer of US exports.

It bought US$349.4 billion of US goods in 2024 and exported US$412.7 billion to the US, according to US Census Bureau data.

Canada had escaped Mr Trump’s broad tariffs imposed in April but still faces other duties, including 50 per cent on steel and aluminium exports to the United States. REUTERS