In a dramatic policy U-turn that stunned markets and policy watchers alike, Canada has officially repealed its controversial 3% Digital Services Tax (DST) just hours before it was set to take effect. The move follows intense pressure from the United States, and in particular from President Trump, who threatened new tariffs and abruptly suspended trade talks in response.
The tax, which targeted tech giants like Google, Amazon, Meta, and Netflix, was expected to generate over CA$7 billion in revenue over five years. Yet, with the threat of an escalating trade war and deepening tensions with Washington, Ottawa chose to pull back.
President Trump didn’t mince words last week, calling Canada’s DST “a direct attack on American business and innovation.” His administration signaled it would not hesitate to impose retaliatory tariffs on Canadian steel, aluminum, and auto parts if the tax proceeded.
On June 29, after tense negotiations, Canadian Prime Minister Mark Carney and Trump agreed to resume trade talks, provided the DST was scrapped immediately. By June 30, Finance Minister François‑Philippe Champagne announced the repeal, citing the need to “stabilize economic relations and protect Canadian jobs.”
For American tech companies, the repeal marks a significant victory. The DST threatened to cost them up to US$3 billion annually and create friction in one of their most profitable international markets. The American Chamber of Commerce in Canada hailed the decision as “a crucial step to maintaining a fair and open digital trade environment.”
On the Canadian side, the decision has triggered criticism from opposition parties and local business groups, who argue that Ottawa surrendered leverage and undermined domestic tax policy. Critics also warn that relying on side deals with Washington could erode Canada’s sovereignty in future trade and regulatory decisions.
Canada initially introduced the DST as an interim measure, anticipating a broader global tax solution under OECD frameworks. However, delays in multilateral agreements—and the risk of U.S. economic retaliation—pushed Ottawa into a corner.
Beyond Canada, the episode sends a clear signal to other nations considering similar digital taxes: the U.S. is willing to use its economic power to protect its technology giants.
