Canada has backed down from implementing its digital services tax, citing hopes for a mutually beneficial trade deal with the United States, Ottawa announced Sunday night—just one day before the tax was set to take effect.

The reversal came after U.S. President Donald Trump declared he would “terminate ALL discussions on Trade with Canada” in retaliation for the planned levy on American tech companies.

“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,” Canadian Prime Minister Mark Carney said in the statement.

Canada’s digital services tax, introduced last year and applied retroactively to 2022, was set to begin collections on Monday.

The 3% levy would have affected both domestic and international tech firms, including U.S. giants like Amazon, Google, and Meta.

Ottawa’s latest move marks a significant U-turn from its position earlier this month, when officials firmly rejected calls to delay the tax despite mounting pressure from Washington.

Canada first proposed the digital services tax in 2020 to address a gap that allowed major tech companies to generate substantial revenue from Canadian users without paying sufficient local taxes.

Ottawa noted that the measure was put in place while it continued collaborating with international partners, including the United States, on a global agreement to replace unilateral digital taxes with a coordinated multilateral framework.