Canada Withdraws Digital Tax After US Trade Threats, UK Maintains Levy

Canada has repealed its digital services tax (DST), which would have imposed a 3% levy on revenues from digital services provided to Canadian users, following intense pressure from U.S. President Donald Trump. Trump had threatened to halt trade negotiations and impose higher tariffs on Canadian imports if the DST remained in place, prompting Canadian Prime Minister Mark Carney to rescind the tax to resume trade talks with the U.S., aiming for a deal by July 21. The White House characterized Canada's move as a capitulation, warning other countries against adopting similar taxes on American tech companies. The DST repeal is seen as critical to preserving the extensive trade relationship between the U.S. and Canada, given the heavy interdependence of their economies. Meanwhile, the UK government plans to maintain its own digital services tax despite U.S. pressure to drop it, signaling a divergence in international approaches to taxing digital services. The ongoing trade negotiations and the handling of digital taxes underscore the broader tensions and strategic economic considerations between the U.S. and its trading partners under President Trump's administration.