Canada has canceled taxes on major U.S. technology companies, allowing trade talks between the two countries to restart just hours before they take effect.
On Friday, U.S. President Donald Trump canceled negotiations on a trade deal, describing the tax rate as a “blatant attack” and threatened higher tariffs on Canadian imports.
In response, Canada said it was removing the tax, which should take effect on Monday.
Digital Services Tax (DST) will mean that U.S. tech giants, including Amazon, Dollar, Google and Apple, face a 3% charge for Canadian revenues of more than 20 million.
Canadian Finance Minister François Philip Champagne issued a statement saying the tax will be cancelled.
It said: “DST announced in 2020 that the goal is to address that many of the large technology companies operating in Canada may not pay taxes on the income generated by Canadians.”
“Canadian preference has always been a multilateral agreement related to digital service tax,” the statement added.
Many countries, including the UK, are changing the way they tax large multinational technology companies with millions of customers and advertisers around the world, but due to the structure of their businesses, senior corporate tax bills.
It is estimated that Canada’s tax revenue will cost tech giants more than $20 billion a year.
Trump has developed a close relationship with tech company owners during his second term, and he delayed the tax.
He described Canada’s policy as “serious” and “we have such power over Canada economically.”
Three-quarters of Canada’s exports are invested in the United States, worth more than $40 billion, while Canada accounts for only 17% of U.S. production.
Canada’s climb is a few months after the roller coaster ride in the United States and Canada relations.
Shortly after taking office, Trump threatened to impose new tariffs and even annex the northern neighbors of the United States.
Confrontation helped push the Canadian Liberal Party, led by former central banker Mark Carney, to regain power.
Since then, there seems to be a settlement, with Canada and the United States saying they aim to reach new trade terms by July 21.
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