Canada retreats on digital tax under Trump’s pressure, highlighting U.S. leverage in trade negotiations.
After months of stubborn posturing, Canada’s government has finally blinked. In a move that underscores just how much leverage the United States wields under President Donald Trump’s leadership, Ottawa has withdrawn its controversial digital services tax — a tax that would have gouged American tech giants for billions and threatened to send the cost of digital services for ordinary Canadians through the roof. The timing is no accident: the first payment for this tax was set for Monday, but with Trump’s administration slamming the brakes on trade negotiations, Canada had little choice but to cave.
This tax wasn’t some benign revenue measure. It was a 3% levy on the digital services revenue that big tech companies earned from Canadian users, targeting firms with more than C$20 million ($14.6 million) in annual revenue from Canada. The goal was simple: squeeze American companies for cash to fund Ottawa’s own spending priorities.
President Trump’s response was swift and decisive. When Canada refused to drop the tax, he ended all trade negotiations. Treasury Secretary Scott Bessent wasn’t surprised — Trump’s team saw this coming — but they made it clear there would be no progress until Ottawa backed down. The usual suspects predicted disaster.
Except that didn’t happen. Canadian business leaders and opposition politicians, recognizing the economic peril, piled on the pressure, urging Prime Minister Mark Carney’s government to scrap the tax before it could do lasting damage.
