Mark Carney, left, agreed to resume talks with the Donald Trump, right, during a phone call on Sunday - The Canadian Press / Alamy Live News Canada has abandoned plans to impose a new digital services tax on US companies in a bid to revive trade talks with Donald Trump.
Mark Carney’s government axed the new levy just hours before it was due to come into effect on Monday, with the country racing to secure a deal with America before a looming deadline on July 21.
The Canadian prime minister agreed to resume talks with the US president during a phone call on Sunday, easing tensions after Mr Trump said on Friday that he was “terminating all discussions” with Ottawa.
It came after Mr Trump condemned the proposed digital services tax, which he described as a “blatant attack” on US tech companies.
The tax would have imposed a 3pc levy on the digital services revenue a company earned from Canadian users above $20m (£14.6m) in a calendar year, backdated to 2022.
The dollar fell towards a four-year low against sterling in the wake of Canada’s climbdown, as investors hope it will increase the chance of a trade deal before the deadline and lead to lower interest rates.
François-Philippe Champagne, Canada’s finance minister, said: “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress.”
Meanwhile, there are now just 10 days to go before a 90-day suspension of Mr Trump’s “liberation day” tariffs expires on July 9, potentially reigniting global trade chaos.
So far, the US has only officially announced a trade deal with Britain – which has reduced tariffs on UK car exports and aerospace equipment as of today.
Scott Bessent, the US treasury secretary, said on Friday that about 20 countries that fail to strike a deal by next Wednesday could continue to negotiate with the US.
However, he warned they could face the higher rates set out by President Trump on April 2, or stay at the present baseline 10pc level if they are considered to be “negotiating in good faith”.
But hours later, Mr Trump reiterated his threat to reinstate higher tariffs on countries that had not made trade deals.
He said: “We can do whatever we want. I’d like to just send letters out to everybody: ‘Congratulations. You’re paying 25pc’.”
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