JUST IN: Canada Folds To Trump In Latest Trade Dispute With US

It only took two days of pressure from President Donald Trump before Canada caved to his latest trade demands.

Canadian officials now say they will back off a so-called Digital Services Tax, which was set to be slapped on American companies selling services in Canada, even if they do not have a physical presence there. U.S. Treasury Secretary Scott Bessent had asked Canadian Prime Minister Mark Carney to pause implementation of the new tax while both countries continue negotiations toward a long-term trade deal.

The change comes after President Trump declared America holds “all the cards” in the negotiations and threatened Canada with a severe counteroffer if they did not withdraw the tax.

Carney announced on Sunday that he will withdraw the tax “in anticipation” of a beneficial deal with Trump.

“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,” Carney said in the statement.

The tax, which was retroactive, dating back to 2022, was set to start collections on Monday, according to CNBC. It would have levied up to 3% in surcharges on business from U.S. behemoths like Amazon, Google, and Apple.

Canada’s Minister of Finance and National Revenue, Francois-Philippe Champagne, added, “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.”

However, the statement from Canada’s Finance Ministry added that Carney “has been clear that Canada will take as long as necessary, but no longer, to achieve that deal.”

Trump has not yet responded to news of Canada backing down. On Friday, he warned of “terminating” all trade negotiations with Canada if Carney did not pause beginning collections for the Digital Services Tax, which he called “a direct and blatant attack on our Country.”

The proposed tax drew similarly swift blowback from Trump’s economic advisors.

“They’re taxing American companies who don’t necessarily even have a presence in Canada,” said White House National Economic Council Director Kevin Hassett said Friday afternoon, calling the tax “almost criminal.”

“They’re going to have to remove it,” he said, Politico reported. “And I think they know that.”

Later in the day, Trump told reporters in the Oval Office that he holds “all the cards” in negotiations with Carney.

“We have all the cards. We have every single one. We don’t want to do anything bad, but … economically, we have such power over Canada. It’d rather not use it,” Trump said Friday.

At stake is a trade relationship valued at more than three-quarters of a trillion dollars. Trump has long complained that other countries like Canada benefit from a trade surplus over the U.S., meaning Canada sells more to Americans than it imports.

In April, President Trump announced a “Liberation Day” of new tariffs on dozens of countries around the globe, a dramatic attempt to reset trade relationships back in America’s favor. He had already slapped a 25% tariff on most Canadian imports shortly after taking office.