Canada RESCINDS DIGITAL TAX after Trump threatens retaliatory tariffs
By ljdevon // 2025-07-01
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Under the looming shadow of economic retaliation, Canada has abruptly reversed course on its controversial digital services tax (DST), rescinding the policy just one day before the first payments were due. The sudden withdrawal follows President Donald Trump’s fiery declaration that he was “terminating ALL discussions on Trade with Canada” in response to what he called a “blatant attack” on U.S. tech firms. This dramatic standoff exposes the fragility of U.S.-Canada trade relations under Trump’s aggressive “America First” agenda — a strategy that has already reshaped global economic alliances. With Trump vowing retaliatory tariffs within seven days, Canada’s retreat reveals just how much is at stake when nations challenge U.S. dominance in digital markets. Could this be the beginning of a broader crackdown on foreign taxes targeting Silicon Valley? Or is Ottawa merely delaying an inevitable confrontation? Key points:
  • Trump severed all trade talks with Canada, citing Ottawa’s digital services tax (DST) as discriminatory against U.S. tech giants.
  • Canada rescinded the tax just before enforcement began, fearing economic retaliation from the U.S. government.
  • The DST would have imposed a 3% levy on major tech firms like Amazon, Google, and Meta, retroactive to 2022.
  • Treasury Secretary Scott Bessent condemned the tax as “patently unfair,” while Trump vowed retaliatory tariffs would replace any future negotiations.
  • U.S.-Canada trade tensions escalate amid broader disputes over dairy tariffs, border security, and drug trafficking.

Canada folds under U.S. pressure

Initially passed in 2020, Canada’s digital tax was designed to capture revenue from tech corporations that profit from Canadian users while paying minimal local taxes. The policy mirrored similar measures in the European Union, drawing fierce criticism from American officials who argue such taxes unfairly target U.S.-based firms. But when Trump issued his ultimatum — promising unspecified tariffs within a week — Ottawa quickly backtracked. Canadian Prime Minister Mark Carney framed the reversal as a goodwill gesture, stating the decision would “support a resumption of negotiations” toward a July 2025 trade deal. Finance Minister Francois-Philippe Champagne echoed the sentiment, insisting the move would “reinforce our work to create jobs” while keeping talks alive. Yet the retreat comes at a cost. Critics argue Canada has surrendered sovereign tax policy to U.S. intimidation, emboldening Washington to demand further concessions. Trump’s history of wielding tariffs as a cudgel — slapping 25% duties on Mexican imports and up to 400% on American dairy — suggests Canada’s hesitation was strategic. If negotiations collapse, retaliatory tariffs could devastate key Canadian exports, from automobiles to lumber.

A global battleground over digital sovereignty

The clash mirrors a wider struggle between Washington and foreign governments seeking to curb Big Tech’s tax avoidance. France, Italy, and Spain have all implemented digital levies, provoking U.S. threats of trade penalties. Trump’s hardline stance reflects a deeper agenda: shielding Silicon Valley from international regulation while asserting American economic hegemony. Treasury Secretary Scott Bessent emphasized this position, accusing Canada of “discriminatory” practices and highlighting the retroactive nature of the DST as uniquely punitive. “None of [the EU’s digital taxes] have done those retroactively,” Bessent told CNBC, estimating the backdated charges at $2 billion—a sum he deemed “patently unfair.” Trump’s calculus appears to hinge on exploiting Canada’s economic dependence on the U.S., which accounts for 75% of its exports. Yet Ottawa’s statement carried a veiled warning: Prime Minister Carney pledged to take “as long as necessary” to secure a fair deal, signaling unresolved tensions beneath the surface. Canada’s initial defiance hints at a growing global impatience with U.S. tech dominance, but these nations have no control over the matter. As multinational corporations exploit loopholes to minimize taxes, nations try to rein them in. Trump’s response may buy temporary compliance but he risks inflaming long-term resentments. This doesn't matter at the moment, because the U.S. continues to gain ground for its industry and economy. Sources include: Yournews.com CNBC.com TruthSocial.com
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