Update 06/30/2025: The Government of Canada has announced that it has rescinded the Digital Services Tax (DST) in order to advance broader trade negotiations with the United States. For now, the June 30, 2025, collection of the DST will be halted. We will continue to monitor the impact of ongoing trade negotiations and provide updates as necessary.
In a previous article, we highlighted that Canada's relatively new digital services tax could become a relevant factor in U.S.–Canada trade relations and could impact whether tariffs are imposed on software and other digital services.
On June 27, 2025, President Trump announced that the United States is immediately terminating all discussions on trade with Canada as a result of Canada's digital services tax, which Canada begins collecting from foreign and domestic technology companies as of Monday, June 30, 2025.
As a result of Canada's digital services tax, President Trump will announce additional tariffs on Canada within the next seven days.
What is the Digital Services Tax?
The digital services tax is a 3% tax imposed by the Canadian government pursuant to the Digital Services Tax Act (DSTA) on large domestic and foreign technology companies that earn revenue by engaging with online users in Canada. This tax will affect large U.S. technology companies such as Amazon, Google and Meta.
Key Takeaways
Canada's digital services tax has certainly become a relevant factor in US-Canada trade relations. Whether it will result in tariffs being imposed on software and other digital services still remains to be determined. We will continue to monitor the situation and provide updates as appropriate.
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