Canada is withdrawing its digital services tax in a move aimed at restarting trade negotiations with the United States.

The decision was announced Sunday by Finance Minister François-Philippe Champagne, who said the government will introduce legislation to repeal the Digital Services Tax Act.

The tax, which was scheduled to take effect Monday, would have applied a three per cent levy on revenue earned from Canadian users by large digital companies.

That included firms such as Amazon, Google, Meta and Airbnb, with payments set to be retroactive to 2022.

The measure had drawn sharp criticism from U.S. officials, including President Donald Trump, who abruptly ended trade talks with Canada last week and threatened new tariffs on Canadian goods.

On Friday, Trump called the tax a “blatant attack” on U.S. technology firms.

Following the announcement, Prime Minister Mark Carney and President Trump agreed to resume negotiations to reach a new economic and security agreement by July 21.

“Canada’s new government will be guided by what’s best for Canadian workers and businesses in talks with the U.S.,” Carney said in a statement.

Champagne explained that the decision to rescind the tax will help move negotiations forward and support long-term economic growth.

“Canada’s new government is focused on building the strongest economy in the G7 and standing up for Canadian workers and businesses,” he 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.”

The digital services tax was first introduced in 2020 to address concerns that large multinational tech companies were generating significant revenue from Canadian users without paying a fair share of tax in Canada.

While Canada had expressed a preference for a multilateral solution through international talks, it moved ahead with its legislation after global negotiations stalled.

Canada is the United States’ second-largest trading partner after Mexico and the largest buyer of U.S. exports.

Canada imported $349.4 billion in American goods last year and exported $412.7 billion to the U.S., according to recent U.S. trade data.

Carney framed the decision as part of a broader effort to protect Canadian workers and rebuild trade ties.