White House says Canada 'caved' on digital services tax after pressure from Trump

CANADA’S PRIME MINISTER Mark Carney “caved” to pressure applied by US President Donald Trump regarding the country’s digital services tax, a White House spokesperson has said. 

Canada announced yesterday that it would rescind taxes impacting US tech firms that had prompted Trump to call off trade talks, adding that negotiations with Washington would resume.

“It’s very simple. Prime Minister Carney and Canada caved to President Trump and the United States of America,” Press Secretary Karoline Leavitt said in a daily briefing.

Leavitt said Trump “knows how to negotiate,” adding that “every country on the planet needs to have good trade relationships with the United States.”

“And it was a mistake for Canada to vow to implement that tax that would have hurt our tech companies here in the United States.”

The digital services tax, enacted last year, would have seen US service providers such as Alphabet – the parent company of Google – and Amazon on the hook for a multi-billion-dollar payment in Canada by today, analysts said.

Washington has previously requested dispute settlement talks over the tax – but on Friday Trump, who has weaponized US financial power in the form of tariffs, said he was ending trade talks with Ottawa in retaliation for the levy.

He also warned that Canada would learn its new tariff rate within the week.

But yesterday, Ottawa binned the tax, which had been forecast to bring in Can$5.9 billion (US$4.2 billion) over five years.

Finance Minister Francois-Philippe Champagne “announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” a government statement said.

It added that Trump and Canadian Prime Minister Mark Carney “have agreed that parties will resume negotiations with a view towards agreeing on a deal by 21 July, 2025.”

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There was no immediate comment from the White House or Trump.

US Treasury Secretary Scott Bessent told CNBC on Friday that Washington had hoped Carney’s government would halt the tax “as a sign of goodwill.”

Canada has been spared some of the sweeping duties Trump has imposed on other countries, but it faces a separate tariff regime.

Since returning to the White House in January, Trump has also imposed steep levies on imports of steel, aluminium and autos.

Canada is the largest supplier of foreign steel and aluminium to the United States.

Last week, Carney said Ottawa will adjust its 25% counter tariffs on US steel and aluminium – in response to a doubling of US levies on the metals to 50% – if a bilateral trade deal was not reached in 30 days.

“We will continue to conduct these complex negotiations in the best interest of Canadians,” Carney said Friday.

He had previously said a good outcome in the talks would be to “stabilize the trading relationship with the United States” and “ready access to US markets for Canadian companies” while “not having our hands tied in terms of our dealings with the rest of the world.”

Carney and Trump met on the sidelines of the Group of Seven summit in Canada earlier this month. Leaders at the summit pushed Trump to back away from his punishing trade war.

Dozens of countries face a 9 July deadline for steeper US duties to kick in – rising from a current 10%.

It remains to be seen if they will successfully reach agreements before the deadline.

Bessent has said Washington could wrap up its agenda for trade deals by September, indicating more agreements could be concluded, although talks were likely to extend past July.

- © AFP 2025