Canada scraps digi tax, bowing to US pressure; Australia could face similar headwinds

The Canadian move raises the prospect that the US administration may place more pressure on Australia to act similarly on previous sticking points in trade negotiations.

Anthony Albanese on the phone with Donald Trump in February.

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Canada has backed down and announced it would repeal its digital services tax in a bid to renew trade negotiations with the US.

The move will potentially ramp up pressure on Australia to soften its position on online ­safety.

This comes as the Trump administration’s July 9 deadline approaches, threatening steep “reciprocal tariffs” that had ear­­lier been delayed.

Canadian Finance Minister Francois-Philippe Champagne announced on Monday (Australian time) the government would rescind the digital services tax, which charged tech giants 3 per cent of revenue for using Canadian users’ engagement, data, and content.

The proposed measure had faced fierce opposition in the US.

US President Donald Trump on Friday wrote on his social media platform Truth Social that “based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately”.

The move raises the prospect the US administration may place more pressure on Australia to make a similar move.

Some US officials have spoken out against Australia’s action on online safety – for example, the incoming social media ban for children aged under 16 – and the news media bargaining code.

“We certainly support the news bargaining code, and we’ve made it very clear, for example, to the US … that that’s not on the table any more than the social media ban for under 16s is on the table either,” Anthony Albanese said earlier in June.

Mr Champagne said the rescission was in “anticipation of a mutually beneficial comprehensive trade arrangement with the US”.

“Consistent with this action, Prime Minister (Mark) Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.”

Opposition trade spokesman Kevin Hogan on Monday again urged the Prime Minister to meet with Mr Trump face to face, warning that Australian exporters would be “hit hard” under the tariffs.

“It is frankly embarrassing – especially as (Foreign Minister) Penny Wong heads to the Quad Foreign Ministers’ Meeting in Washington as the only representative whose leader has not physically met with President Trump,” he said.

“The US remains one of Australia’s most important trading partners, with strong mutual economic interests underpinned by longstanding agreements such as the Australia–US Free-Trade Agreement.

“However, Australian exporters are facing uncertainty with no resolution since tariffs were imposed earlier this year.

“Resolving trade tensions – particularly tariffs affecting Australian agricultural and manufactured exports – must be a top priority.”

“The 90-day pause on full implementation of these tariffs is about to expire.

“Without action, Australian exporters will be hit hard.”