Trade negotiations between the United States and Canada are set to resume after Canada dropped its planned digital services tax aimed at American tech giants, according to White House economic adviser Kevin Hassett. He confirmed the restart of talks during a Fox News interview on Monday (June 30). White House Press Secretary Karoline Leavitt said Canadian Prime Minister Mark Carney called President Donald Trump Sunday evening to announce the reversal, calling it a win for US tech firms. She attributed the move to Trump’s tough negotiating tactics.

Trump had asked Canada to withdraw the tax during a G7 summit earlier in June. Canada cancelled the plan just before it was due to take effect on Monday. Finance officials said the tax, which would have applied retroactively to 2022, will now be repealed. The Canadian tax would have imposed a 3% levy on digital revenues from Canadian users exceeding US$20 million, affecting major US companies like Amazon, Meta, Google, and Apple.

In response, US Commerce Secretary Howard Lutnick thanked Canada, saying the tax would have been a deal-breaker. Optimism over renewed trade talks helped boost US stock markets Monday morning. US Treasury Secretary Scott Bessent also voiced optimism about upcoming trade deals but warned that countries may not receive extensions beyond a July 9 deadline, when US tariff rates are set to rise sharply unless agreements are reached.

Trump, who had halted trade talks with Canada last week over the tax, warned of new tariffs if Ottawa didn’t reverse course. He is expected to meet with his trade team soon to determine new tariff rates for uncooperative countries. Carney and Trump agreed at the G7 to finalize a new trade deal within 30 days. Canada’s Finance Minister François-Philippe Champagne will introduce legislation to repeal the tax.

Canadian business groups praised the move, saying the tax would have raised costs and hurt the economy. However, critics noted the decision contradicts campaign promises made by Carney’s Liberal party to stand firm against Trump. Opposition leader Pierre Poilievre called for stronger Canadian demands in the talks, urging the government to prioritize national interests. Canada is the US’s second-largest trading partner, buying US$349.4 billion in American goods and exporting US$412.7 billion to the US last year. While Canada avoided Trump’s broader April tariffs, it still faces steep duties on steel and aluminum.

Disclaimer: This image is taken from Reuters.