Prime Minister Mark Carney said Monday he and U.S. President Donald Trump had agreed to “recommence” negotiations on a trade and security deal.
The federal government had announced late Sunday that it was rescinding the digital sales tax, just two days after Trump terminated talks over the levy.
“Last night I had a good conversation with President Trump and we agreed to recommence our negotiations with the view to the July 21 deadline that we had agreed to in Kananaskis,” Carney told reporters in Ottawa.
Finance Minister François-Philippe Champagne, in announcing the decision to rescind the tax on Sunday, said it would allow negotiations of a new economic and security relationship with the U.S. “to make vital progress.”
“We’re looking forward to more talks,” White House National Economic Council Director Kevin Hassett told reporters in Washington on Monday.
White House press secretary Karoline Leavitt told reporters during a press conference that Trump had made his position on the levy “quite clear.”
“It’s very simple, Prime Minister Mark Carney and Canada caved to President Trump and the United States of America,” Leavitt said. “President Trump knows how to negotiate and he knows that he is governing the best country and the best economy in this world, on this planet.
“It was a mistake for Canada to vow to implement that tax that would have hurt our tech companies here in the United States.”
Asked if he had received anything in exchange for dropping the tax, Carney told reporters it was part of a “bigger negotiation,” but did not elaborate.
“It was something that we expected, in the broader sense that would be part of a final deal,” Carney said. “We’re making progress towards a final deal. There’s more to be done, to be clear.”
He also spoke of the timing between the deadline date for a deal compared to when the digital tax would come into place, saying it did not make sense to collect a tax and then remit the revenue back, saying this provides “some certainty.”
The shift comes only a week after Champagne said the tax was “going ahead.”
Conservative Leader Pierre Poilievre on Monday criticized the government’s change on the levy.
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“As recently as two days ago, the finance minister insisted the digital services tax would proceed,” Poilievre wrote in a post on X. “Then the prime minister put his elbows down and cancelled the tax at the 11th hour.”
Poilievre went on to call on Carney to “insist” the U.S. rescind its tariffs on Canadian softwood lumber, saying gains must be made during trade talks with the U.S.
“Canadians need certainty that Liberals will put Canada First and defend Canadian sovereignty in these negotiations,” Poilievre said.
The NDP said the federal government was “caving in” to Trump and “his billionaire friends” by rescinding the tax.
“Canada is a sovereign country with the right to make our own tax laws,” said interim NDP Leader Don Davies in a statement. “Abandoning fair taxation of tech giants is unacceptable appeasement.”
On Monday, the Canadian Chamber of Commerce commended the government on the move.
“As the Canadian Chamber of Commerce has argued since the beginning, the decision to eliminate the DST (digital services tax) makes sense,” said David Pierce, vice-president of government relations for the chamber.
“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.”
U.S. Commerce Secretary Howard Lutnick said in a post on social media that he appreciated the move, saying the tax would have been a “deal breaker” for any trade deal.
“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,” Lutnick posted.
U.S. Ambassador to Canada Pete Hoekstra echoed Lutnick’s comments, saying it was “encouraging and constructive.”
“Canada’s decision to rescind its digital services tax and return to the negotiating table is the right move,” he wrote on X.
Last Friday, Trump announced on Truth Social that it was terminating all discussions due to the “egregious Tax,” and warned it would let Canada know the tariff it would be paying to do business with the U.S. in the next seven days.
Hassett on Monday didn’t directly answer if a new tariff rate for Canada was still on the table after the tax was scrapped, only telling reporters, “We’ve made lots of progress in our discussions with Canada.”
Friday’s statement came days after Trump and Carney had agreed at the G7 summit in Alberta to pursue negotiations on the trade and security deal within 30 days.
The president said later on Friday the negotiations would be stopped until “they straighten out their act,” but he did not say whether it mattered if the tax was removed or not.
The digital services tax was announced in 2020 and would see companies like Amazon, Google, Meta, Uber and Airbnb face a three per cent levy on revenue from Canadian users.
It would apply retroactively, leaving U.S. companies with a US$2 billion bill due Monday. A June 11 letter signed by 21 members of Congress said U.S. companies would pay 90 per cent of the revenue Canada will collect from the tax.
It was intended to overcome what the Canadian government saw as a tax loophole, with big tech companies operating in Canada digitally, making money off Canadian users and data, but not paying a tax on it in Canada.
Trump’s administration has for weeks been seeking to eliminate other countries’ digital sales taxes, particularly in Europe, that the U.S. argues would be unfairly harmful to American firms, with Trump citing Europe’s duty in announcing his stance on Canada on Friday.
U.S. businesses and politicians have argued the tax targets U.S. companies, with the tax applying to all large tech companies no matter where they were based. However, because so many are based in the U.S., those firms would have paid the bulk of the money.
The opposition isn’t new though, as the Biden administration also pushed back against the tax.
Canada and other countries that have the tax have argued it’s necessary to ensure tax fairness.
—With files from Global’s Sean Boynton, Ari Rabinovitch, Bryan Mullan and Marc-Andre Cossette, and the Canadian Press
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