Topline
U.S. Futures rose early on Monday after the Canadian government scrapped its digital-services tax—which would have targeted major U.S. tech giants—in bid to salvage trade talks with the U.S. and placate President Donald Trump, who called the tax a “blatant attack” on the American economy and suspended ongoing trade talks.
Canadian Prime Minister Mark Carney’s office said he spoke with President Donald Trump on Sunday.
Key Facts
In a statement issued late on Sunday, the Canadian government said it would “rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”
The decision to rescind the DST—the first payments for which were due on Monday—will have to be approved by Canada’s parliament, and the statement said the country’s Finance Minister François-Philippe Champagne will “soon bring forward legislation” to do so.
As the legislation moves through the parliament, the finance ministry has decided to halt DST collection starting Monday.
Canadian Prime Minister Mark Carney’s office told various outlets that he spoke with Trump on Sunday to discuss rescinding the tax, and both leaders intend to reach a trade agreement by July 21.
The president and the White House have not yet commented on Canada’s decision.
How Have U.s. Futures Reacted?
U.S. stock futures rose sharply early Monday amid revived hopes of a swift U.S.-Canada trade deal. The tech-heavy Nasdaq Futures index saw the biggest bump, rising 0.61% to 22,890 points. The benchmark S&P 500 Futures index climbed 0.41% to 6,249.25 points, while Dow Futures jumped 0.46% to 44,329 points. In the premarket, shares of Google were up nearly 1.5% to $180.90, while Meta surged 1.76% to $746.55. Amazon, Apple and Microsoft’s stock prices rose 0.7%, 0.63% and 0.5%, respectively, in early trading.
What Do We Know About The Digital Services Tax?
Canada’s Digital Services Tax Act was approved by the country’s legislature last year and went into effect on June 28, 2024. Under this law, both companies would need to pay a 3% tax on revenue they generate from digital services provided to Canadian users. The rule would only apply to firms whose digital revenue in Canada was more than $14.6 million (CA$20 million). The tax would be applied retroactively to revenue generated since 2022, and the first payments were due on Monday.
What Had Trump Said About Canada’s Digital Services Tax?
In a Truth Social post on Friday, Trump announced he was terminating all trade talks with Canada, saying the country has been “very difficult” to trade with. The president complained about China’s tariffs on U.S. dairy products before lashing out against the DST, saying it targeted “our American Technology Companies, which is a direct and blatant attack on our Country.” Trump suggested that Canada was “copying the European Union” on this matter and said the “egregious Tax” was the reason he was canceling all trade talks. In the post, the president said he would inform Canada the “Tariff that they will be paying to do business” with the U.S. within seven days.
Further Reading
Canada rescinds digital services tax to advance trade discussions with the United States (CBC News)
Federal government rescinds digital services tax to advance trade talks with U.S. (The Globe and Mail)
Trump Says Deadline For Tariff Negotiations Isn’t Firm After All (Forbes)
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