Canada Will Scrap Tax That Prompted Trump to Suspend Trade Talks

Canada|Canada Will Scrap Tax That Prompted Trump to Suspend Trade Talks

Canada’s government announced on Sunday night that it would cancel a tax on American technology companies that led President Trump to suspend trade talks between the two countries, handing an important victory to Mr. Trump.

Prime Minister Mark Carney discussed the decision to scrap Canada’s digital services tax with Mr. Trump on Sunday, Mr. Carney’s office said. In a sign that trade talks were resuming, Canada’s finance minister, François-Philippe Champagne, spoke with the U.S. Trade Representative, Jamieson Greer, on Sunday, according to Mr. Carney’s office.

The tax, which had been due to take effect on Monday, became the latest flashpoint in difficult negotiations between the United States and Canada on Friday, when Mr. Trump said the talks were off. On social media, Mr. Trump called the levy a “blatant attack” and said he would inform Canada within a week about the duties “they will be paying to do business with the United States of America.”

Forty-eight hours later, the Canadian government folded, announcing it would not go ahead with the tax.

Technically, the cancellation of the tax needs to be approved in legislation, so until that time, the government is suspending its collection. Politically, canceling the tax should be a simple matter for the government.

Canada’s 3 percent digital services tax has been in place since last year, but the first payments were only due beginning on Monday. Because the tax is retroactive, American companies were preparing to turn over roughly $2.7 billion to the Canadian government, according to a trade group for large American tech companies.

U.S. officials from both parties have long chafed at taxes like the one Canada has imposed, calling them unfairly targeted at services provided by American companies like Google, Apple and Amazon.

This is a developing story. Check back for updates.