Carney Liberals urged to ditch DST as Trump terminates trade talks with Canada
Companies impacted by the 3% levy include heavyweights like Amazon, Google, Facebook-parent company Meta, and Uber
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OTTAWA – Canada’s insistence on taxing American tech companies for Canadian-sourced revenue has prompted the U.S. to walk away from ongoing trade negotiations.
In a social media post on Friday, U.S. President Donald Trump announced an immediate suspension of trade and tariff talks with Canada due to the Digital Services Tax (DST) – describing it as “egregious” and a “direct and blatant attack” on the U.S.
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“Based on this egregious tax, we are hereby terminating all discussions on trade with Canada, effective immediately,” Trump wrote on TruthSocial. “We will let Canada know the tariff that they will be paying to do business with the United States of America within the next seven day period.”
In response, Canada had little to say regarding Trump’s statement.
“The Canadian government will continue to engage in these complex negotiations with the United States in the best interests of Canadian workers and businesses,” read the one-sentence statement from the PMO.
Ottawa has been under intense pressure to repeal the DST ahead of Monday’s deadline requiring online service providers to make good on retroactive payments on revenues collected since 2022 – a $2 billion tax bill the finance department confirmed this week is still due.
Under the law, non-Canadian digital services with annual incomes more than $1.1 billion must pay a 3% levy of all revenues from Canadian users exceeding $20 million.
Impacted companies include heavyweights like Amazon, Google, Facebook-parent company Meta, and Uber.
The tax, enacted a year ago via an order-in-council, was part of the Trudeau Liberal’s election platform since at least 2019.
Chrystia Freeland, speaking in June 2024 when she was still deputy prime minister, said Canada would be moving ahead, despite U.S. opposition.
“Its simply not reasonable, not fair, for Canada to indefinitely put our own measures on hold,” she said at the time. “Other countries have a DST in place right now, and they have had a DST in place for a number of years with no retaliation.”
Trump’s announcement also ends the government’s hopes the DST would become part of the ongoing trade negotiations, as mentioned by Finance Minister Francois-Philippe Champagne last week.
Opposition to the tax has been far-reaching, both here and in the United States.
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Earlier this month, a letter signed by 21 members of the U.S. Congress urged the President to take action, saying the tax would cost U.S. tech companies billions.
Conservative Leader Pierre Poilievre expressed dismay at the suspension of the talks.
“The government must take emergency action to bolster Canada’s economy,” he wrote in a statement.
“Fully repeal the no-pipelines law, the industrial carbon tax, the tanker ban, the emissions cap, the EV mandate, and axe the capital gains tax on reinvestments in Canada. All to create a strong, self-reliant and sovereign Canadian economy.”
Goldy Hyder, president and CEO of the Business Council of Canada, said they’ve warned the government for years the DST would undermine Canada’s economic relationship with the U.S.
“That unfortunate development has now come to pass,” Hyder said. “In an effort to get trade negotiations back on track, Canada should put forward an immediate proposal to eliminate the DST in exchange for an elimination of tariffs from the United States.”
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Alex Brown, a director with the National Citizens Coalition, told the Toronto Sun his sources said the DST has been a long-time irritant to the White House, and isn’t surprised at Trump’s reaction.
He said this – alongside the government’s refusal to repeal its anti-pipelines, anti-oil tanker and anti-energy extraction legislation – is yet another example of Carney hamstringing himself by clinging to unpopular Trudeau-era policy.
“We are paying for the mistakes of the last decade,” he said.
“As the author of the Art of the Deal, Trump has negotiated for more with less. Ten years of short-sighted and absent-minded Trudeau policy can be used as an excuse to get exactly what the Americans want.”
He said if the government clings to the DST, trade negotiations will instead become a reckoning for Canada.
“It won’t be pretty, and it won’t come as easy as the Prime Minister would have hoped,” Brown added.
On X: @bryanpassifiume
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