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US to resume trade talks after Canada abandons digital services tax
US President Donald Trump meets Canadian Prime Minister Mark Carney in the Oval Office of the White House in Washington, DC, on May 6, 2025. AFP File
The White House on Monday said the United States will restart trade talks with Canada following Ottawa's decision to drop its digital services tax on US tech companies.
'Absolutely,' Fox News quoted White House economic adviser Kevin Hassett as saying on Monday when asked about the status of the talks.
According to a Reuters report, citing White House officials, US President Donald Trump had urged Canada to drop its planned digital services tax during a G7 meeting earlier in June.
'It's something they've studied, now they've agreed to, and for sure, that means we can get back to the negotiations,' Trump was quoted as saying.
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Canada suspended the rollout of the tax, set to take effect Monday, just hours before it was due to begin, aiming to revive stalled trade talks with the US.
Late Sunday, Canada's finance ministry announced that Prime Minister Mark Carney and President Trump would resume negotiations, with the goal of reaching 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. https://t.co/b944wQ4cyn — Howard Lutnick (@howardlutnick) June 30, 2025
'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.
On Monday, Wall Street opened higher, with stocks hitting record levels as investor optimism grew around US trade negotiations with key partners, including Canada.
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US Treasury Secretary Scott Bessent voiced confidence in the possibility of 'a flurry' of trade deals before a July 9 deadline. After that date, 10% tariff rates on imports from many countries are set to revert to President Trump's previously announced levels of 11% to 50%.
Speaking to Bloomberg Television, Bessent cautioned that no automatic extensions would be granted, even for countries negotiating in good faith.
'Any extensions would be up to President Trump,' he was quoted as saying.
Tensions with Canada escalated last week after Trump abruptly halted trade talks, calling Ottawa's proposed digital services tax a 'blatant attack.'
On Sunday, he doubled down, vowing to impose new tariffs on Canadian goods within the week, threatening to upend recent stability in US-Canada trade ties.
'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,' Reuters quoted Bessent as saying.
'I hope that won't have to happen,' he added.
Trump and Canadian Prime Minister Mark Carney met at the G7 summit, agreeing to finalize a new economic deal within 30 days.
Canada's proposed 3% digital services tax—retroactive to 2022—targeted revenue from Canadian users exceeding $20 million annually, affecting major U.S. tech firms like Amazon, Meta, Google, and Apple.
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The tax, set to take effect Monday, has been halted. Canada's finance ministry said Finance Minister François-Philippe Champagne will introduce legislation to repeal the Digital Services Tax Act.
Canadian business groups welcomed the move, as well as the U.S. Congress' decision to drop a retaliatory tax provision—Section 899—from GOP tax legislation.
'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,' Reuters quoted David Pierce, vice president of Government Relations at the Canadian Chamber of Commerce, as saying in a statement.
Some observers said Carney's decision ran counter to his campaign promises, however, Carney's Liberal party won an election in April pledging to stand up to Trump.
'It feels like we're standing down really quickly,' Vass Bednar, managing director of the Canadian Shield Institute for Public Policy, a think tank, told Reuters.
Opposition Conservative Party leader Pierre Poilievre said Carney needs to demand concessions from Trump.
'Canadians need certainty that Liberals will put Canada First and defend Canadian sovereignty in these negotiations,' Poilievre said on X.
Canada is the second-largest US trading partner after Mexico, and the largest buyer of US exports. It bought $349.4 billion of US goods last year and exported $412.7 billion to the US, according to US Census Bureau data.
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Canada had escaped Trump's broad tariffs imposed in April but still faces other duties, including 50% on steel and aluminum exports to the United States.
With inputs from agencies
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