On the heels of the announced timeline of 30-days for a U.S.-Canada trade deal, our two  nations have an opportunity to reset and strengthen the economic partnership that has been  the foundation of North American prosperity for generations. Business leaders and  associations, including the Canadian American Business Council (CABC), have long advocated  for early and collaborative engagement on potential trade irritants before they escalate into  larger disputes that strain our integrated economies. 

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Canada’s Digital Services Tax (DST) has been a source of friction between the countries for  years, but the irritant has now escalated into tangible economic peril. Canada’s plan to collect  the DST on June 30, coupled with Section 899 which proposes additional tax on foreign  investors from countries with discriminatory tax policy, escalates tensions between two of the  world’s closest trading partners at a time when economic cooperation is more important than  ever. And as the CABC has long warned, retaliation is now officially on the table with Section 899.  

The DST may have been conceived to go after US tech giants, but the impact hits Canadian  consumers and small businesses that rely on digital platforms who will also feel the pain of  higher prices. Canadian households and businesses are already grappling with inflation, supply  chain pressures, and affordability. A new digital tax that could increase the cost of everyday  services—food delivery, ride shares, vacation rentals—is not in their interest. The very real  threat of U.S. retaliatory measures further penalizes Canadians at a moment when both nations  need economic stability.  

Beyond the immediate financial impact, DST carries profound implications for American  workers and competitiveness as well. Recent analysis suggests up to 3,140 American jobs could  be lost as companies adjust to these new costs, while the annual $2.3 billion burden on U.S.  businesses will reduce export revenues and shrink U.S. tax base. Meanwhile, small and medium  enterprises (SMEs) will face negative trickle-down impacts, as the tax stifles their ability to  grow, scale, and innovate domestically. Startups will also be deterred from innovating and  investing in Canada, stalling the country’s growth. Coupled with Section 899, corporate  investment and innovation on both sides of the border is severely at risk.  

From a business perspective, the DST also undermines predictability given its retroactive nature. Forcing companies to pay taxes on revenues from 2022 and 2023—years that entirely  preceded the law’s enactment—violates broadly accepted international tax principles and  creates dangerous precedent. Businesses need time to plan, and imposing retroactive tax  undermines financial planning that facilitates economic competitiveness.  

The upcoming deadline for DST payment from U.S. companies presents a crucial opportunity to  address these concerns through constructive dialogue rather than unilateral actions from either  nation. On its end, the Canadian government can demonstrate good faith and commitment to  our shared prosperity by suspending the DST’s implementation and eliminating its retroactive provisions. Such a gesture would show respect for our USMCA obligations and create space for  the multilateral negotiations both countries have previously supported. Meanwhile, the U.S.  can begin by postponing the 90-day implementation timeline of the US tax on foreign  investment to further encourage negotiations. Both parties must adopt a constructive  approach. 

The strength of the Canada-U.S. economic relationship has always rested on mutual respect  and shared commitment to fair competition. The Canadian DST undermines both principles. By  pausing collection, Canada can reaffirm its dedication to the partnership that has made both  our nations more prosperous and secure. In turn, the United States should engage Canada in a  spirit of constructive problem-solving. Rather than viewing the DST solely through the lens of  conflict, this moment can be used to deepen bilateral dialogue on the future of digital trade, tax  fairness, and innovation policy. A strong and modern economic relationship requires ongoing  adaptation but also shared principles. 

Ultimately, the Canada–U.S. partnership has long been grounded in a recognition that our  economic success is deeply interconnected. Addressing the DST in a collaborative way would  not only uphold these values but also strengthen our ability to compete globally. Our cross border economic ties are too valuable to sacrifice for short-term, unilateral revenue generation.  The path forward requires dialogue, not discrimination—and the time to choose that path is  now.