U.S. Commerce Secretary thanks Canada for dropping tax, which would’ve been ‘deal breaker’ for deal

U.S. Commerce Secretary Howard Lutnick thanked Canada on Monday for dropping its digital services tax in a move to resume trade negotiations with the United States.

“Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” Lutnick posted on social media.

The post came after Canada late Sunday announced it was dropping the tax Ottawa announced late Sunday that it was dropping the tax following a phone call between Prime Minister Mark Carney and U.S. President Donald Trump.

A White House spokesman gave credit for Canada’s concession to Trump.

“President Trump has once again leveraged the power of the American economy, the best and biggest in the world, to deliver a victory for American industries and workers,” Kush Desai said in a statement.

Canada’s move came just before the first payment under the tax was set to come due for major tech companies like Amazon and Google. The initial payment was retroactive to 2022 and could have collectively cost companies US$2 billion.

Over five years the tax was expected to raise about $7.2 billion.

The sudden about face on Sunday came after Finance Minister François-Philippe Champagne told reporters earlier in June that the tax would be applied as planned.

But on Friday, Trump said the U.S. would be terminating all trade talks with Canada over the tax. He called it a “direct and blatant attack” on the U.S. and threatened Canada with another round of tariffs.

The Canadian Chamber of Commerce called the decision to drop the tax a “savvy” one.

“This tax would have fallen on Canadian consumers, businesses and investors in the form of higher costs and hurt our economy at a critical time,” David Pierce, the chamber’s vice-president of government relations, said in a media statement.

He said ending the tax “moves us one step closer to a renewed, reliable trade deal” with the United States.

Rick Tachuk, president of the American Chamber of Commerce in Canada, said the withdrawal of the tax was a “welcome” move by the Canadian government.

“This is a constructive decision that allows both countries to focus on strengthening their economic partnership. Businesses on both sides of the border rely on policies that support certainty, collaboration, and long-term growth,” he said in a media statement.

- with files from David Baxter

This report by The Canadian Press was first published June 30, 2025.