After Canada abandoned a planned digital services tax on US tech firms, trade negotiations between Ottawa and Washington are set to resume.

Trade talks between the United States and Canada are set to resume this week after the latter scrapped plans for a digital services tax (DST) on US tech firms.

Originally announced in 2020, the DST had foreseen a 3% levy on revenue earned from Canadian digital services users and would have impacted US companies such as Amazon, Meta and Apple.

US President Donald Trump had slammed the proposed tax as a “blatant attack” and called off trade talks on Friday, threatening retaliatory tariffs on Canadian goods.

But the planned tax was rescinded just hours before coming into effect and trade negotiations between the two sides are set to continue with an agreement expected by July 21, according to a statement from the Canadian Foreign Ministry.

“Canada’s preference has always been a multilateral agreement related to digital services taxation,” it read, adding that the withdrawal of the DST comes “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”

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Canada: What was the DST?

Previously, the Canadian government had justified the DST as a step to address a shortfall in taxation on revenues generated from Canadians.

The European Union (EU) has implemented a similar measure and Trump had accused Ottawa of mimicking Brussels.

Canada is the United States’ second-largest trading partner after Mexico, and the largest purchaser of US exports.

Canada bought $349.4 billion (€297.4bn) of US goods last year and exported $412.7 billion (€351.3bn) worth in the opposite direction, according to the US Census Bureau.

Edited by: Srinivas Mazumdaru