Canada has decided to withdraw its digital services tax, a measure aimed at taxing online companies, the government announced on Sunday. This move is intended to restart trade negotiations with the United States.

On Friday, US President Donald Trump canceled trade discussions between the two nations, citing the tax as “a direct and blatant attack on our Country.”

In a statement released on Sunday evening, the Canadian government indicated that rescinding the tax would facilitate a return to negotiations. Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, said, “To support those negotiations, Canada will rescind the Digital Services Tax (DST) as we work towards a mutually beneficial comprehensive trade arrangement with the United States.”

Furthermore, Prime Minister Carney and President Trump have agreed to resume negotiations aiming for a deal by July 21, 2025.

Digital services taxes allow countries to levy taxes on online services, differing from traditional taxes placed on physical products. Trump regards DSTs as “non-tariff trade barriers,” claiming they restrict competition in favor of domestic markets, which he argues disadvantages US companies.

The Canadian DST was scheduled to take effect on Monday and was set to be retroactive to 2022. The cancellation of this tax marks a significant victory for Trump, who has frequently articulated concerns over foreign nations “ripping off” the United States.

The relationship between Canada and the US has been strained since Trump assumed office in January, as he previously threatened to impose tariffs of at least 25% on all Canadian exports. Since then, he has made several adjustments to trade policy and tariff rates that affect not only Canadian goods but also imports from other countries. These sudden changes have caused uncertainty both in the US and internationally, leading businesses of all sizes to rethink their plans for the year.

The situation regarding tariffs remains fluid: on July 9, a deadline for numerous countries to secure agreements to avoid “reciprocal” tariffs will expire. It remains unclear whether Trump will extend this deadline.

According to Department of Commerce data, Canada was the largest purchaser of American goods last year, importing $349 billion worth. Meanwhile, Canada exported $413 billion worth of goods to the US, making it the third-largest source of foreign goods.

This story is ongoing and will be updated as new information becomes available.