Donald Trump called the tech tax "a direct and blatant attack on our country".(Reuters: Amber Bracken)
Canada has scrapped a tax targeting US technology firms, just hours before it was due to take effect, in a bid to advance stalled trade negotiations with the US.
The Canadian government said "in anticipation" of a trade deal "Canada would rescind" the digital services tax, which would have targeted tech giants such as Amazon, Meta, Google and Apple.
Mr Carney said that Canada and the US had agreed a 30-day deadline for trade talks.
Canadian Prime Minister Mark Carney says trade talks with the US have resumed after Canada dropped its plan for a digital services tax that would have hit American tech companies.
US President Donald Trumpsuspended trade talkswith Canada last week over its plans to continue with the levy, which would have been targeted at Silicon Valley giants such as Amazon, Meta, Google and Apple.
Mr Trump called the tax "a direct and blatant attack on our country".
The move plunges US-Canada relations back into chaos after a period of relative calm that included a cordial G7 meeting in mid-June where the countries' leaders agreed to wrap up a new economic agreement within 30 days.
The Canadian government said "in anticipation" of a trade deal "Canada would rescind" the digital services tax which was due to come into effect on Monday.
But following a phone call between Mr Carney and Mr Trump on Sunday, the Canadian prime minister's office announced they had agreed to resume negotiations.
"Today's announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis," Mr Carney said in a statement.
At the G7 summit in Alberta, Mr Carney said that Canada and the US had set a 30-day deadline for trade talks.
Canada's planned levy was 3 per cent of the digital services revenue a firm takes in from Canadian users above $CAD20 million ($24.5million) in a calendar year, and payments were to be retroactive to 2022.
It would have impacted US technology firms, including Amazon, Meta, Google and Apple.
The tax would have applied to periods dating back to 2022, leaving US companies with a $US2 billion ($3 billion) bill due at the end of the month.
The tax collection will be halted, the statement from Canada's finance ministry said.
It would have impacted US technology firms, including Amazon, Meta, Google and Apple.(Reuters)
"The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians," the statement said.
"Canada's preference has always been a multilateral agreement related to digital services taxation."
Going forward Canada's Finance Minister Francois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax Act.
Daniel Béland, a political science professor at McGill University in Montreal, called Mr Carney's retreat a "clear victory" for Donald Trump.
"At some point this move might have become necessary in the context of Canada-US trade negotiations themselves but Prime Minister Carney acted now to appease President Trump and have him agree to simply resume these negotiations, which is a clear victory for both the White House and big tech," Mr Béland said.
He said it makes Mr Carney look vulnerable to the US president's outbursts.
"President Trump forced PM Carney to do exactly what big tech wanted. US tech executives will be very happy with this outcome," he added.
The announcement on Friday was the latest development in the trade war Mr Trump has launched since returning to office in January.
Donald Trump has repeatedly suggested Canada would be absorbed as a US state.(Reuters: Leah Millis)
Relations between the US and Canada have been a roller coaster in recent months. The US president repeatedly suggesting Canada should become America's "51st state" provoked a furious backlash in Canada, though tensions subsided somewhat when Mr Carney was elected in March.
Canada and the US have been discussing easing a series of steep tariffs Mr Trump imposed on Canadian goods.
He has imposed 50 per cent tariffs on steel and aluminium as well as 25 per cent tariffs on autos.
He is also charging a 10 per cent tax on imports from most countries, though he could raise rates on July 9, after the 90-day negotiating period he set would expire.
Topic:Defence and National Security