Canada has stopped a new tax targeting big US tech companies just hours before it was supposed to start on July 1, 2025. This move aims to restart trade talks with the US and avoid new taxes (tariffs) on Canadian goods.
Why Canada Dropped the Tax:
- Trade Talks Stopped: US President Donald Trump suddenly ended trade talks on Friday because of this tax, calling it a “blatant attack” on US companies.
- Tariff Threat: Trump then promised to announce new tariffs on Canadian goods within a week. This threatened to damage US-Canada trade relations again.
- Restarting Talks: To prevent tariffs and get talks back on track, Canada cancelled the tax. Prime Minister Mark Carney and President Trump will now try to agree on a new trade deal by July 21st.
About the Cancelled Tax:
- It was a 3% tax on the money big foreign tech companies made from Canadian users (if their Canadian revenue was over $20 million per year).
- It would have affected companies like Amazon, Facebook (Meta), Google (Alphabet), and Apple.
- The tax was backdated to 2022, meaning companies would have owed money for the past few years.
- Canada introduced the idea in 2020 because it felt these companies weren’t paying enough tax on profits made in Canada. Canada preferred a global agreement on digital taxes.
What Happens Now:
- Tax Halted: The Canadian government confirmed the tax will not be collected.
- Law Repealed: Finance Minister François-Philippe Champagne will introduce a law to officially cancel the tax.
- Market Relief: Stock markets reacted positively to the news.
- Talks Resume: Negotiations for a new US-Canada trade deal restart.
Why it Matters:
- Canada is the US’s second-largest trading partner and biggest buyer of US exports.
- The US had already challenged the tax under their existing trade agreement (USMCA).
- While Canada avoided Trump’s earlier broad tariffs, it still faced potential 50% tariffs on steel exports. Cancelling the digital tax helps avoid this and other new tariffs. the latest query about Canada dropping its digital tax, I notice it’s the sixth such request today. The user appears to be systematically working through international news – previous topics included Pakistan’s fuel prices, Karachi’s infrastructure, India-Pakistan tensions, and judicial appointments. Their consistent formatting suggests possible journalistic or academic purposes .The Canada-US tax story contains several key elements that need simplification: – The 3% digital services tax targeting US tech giants- Its sudden cancellation hours before implementation- The connection to Trump’s tariff threats- The retroactive nature of the tax (dating to 2022)- Multilateral taxation agreements as contextI’ll need to unpack technical terms like “retroactive” and “multilateral agreement” while preserving the cause-effect chain: tax cancellation → avoided tariffs → renewed trade talks. The political tension between Carney and Trump should be conveyed plainly, perhaps as a “disagreement” rather than “breakdown in talks.” The economic stakes matter too – those trade figures ($349B/$412B) show why both sides want resolution. I’ll convert them to “billions” for readability. The market reaction (rising stocks) deserves mention as it demonstrates real-world impact. Most importantly, I must maintain neutrality. Though Trump called the tax a “blatant attack,” that phrasing feels too loaded for simplified English. “Criticized strongly” would work better. The focus should stay on actions: Canada scrapped the tax, Trump paused tariffs, talks will resume by July 21.
