Canada-U.S. trade talks resume Friday as Ottawa proceeds with a digital sales tax despite Donald Trump’s objections to the levy, which hits U.S. tech giants.

First payments are due June 30 for the sales tax and the initial bill faced by big U.S. companies will exceed US$2-billion.

Finance Minister François-Philippe Champagne signalled Thursday that the levy will proceed.

Prime Minister Mark Carney and U.S. President Mr. Trump have set a deadline of mid-July to reach an economic and security deal that would end a painful 3½-month trade war, which was sparked in March by protectionist U.S. tariffs.

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Mr. Carney on Thursday declined to say whether he would accept a deal with the White House that left some Trump tariffs in place on Canadian goods. “It’s a negotiation right now,” he said, adding later “We’ll see.”

The Canadian government has repeatedly said its goal is a deal that removes all tariffs imposed by Mr. Trump but the U.S. President, as recently as the G7 summit, voiced his reluctance to abandon tariffs. “I’m a tariff person,” he told reporters in Kananaskis, Alta.

Dominic LeBlanc, the minister responsible for Canada-U.S. relations, told reporters that he and Kirsten Hillman, Canada’s ambassador to the United States, will hold further talks Friday with Jamieson Greer, the United States Trade Representative.

The first revenue collection this June 30 of the digital sales tax will likely exacerbate the U.S.-Canada trade war, but leaving the tax in place also gives Ottawa leverage in continuing talks to end the conflict.

Mr. Champagne told reporters that the tax will apply as planned. “That law was passed in Parliament. It applies, so that’s where we are today,” he told reporters.

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He acknowledged that the future of the digital tax is “is something that we’re considering as part of broader discussions.”

The tax will hit companies like Amazon, Google parent Alphabet, Meta, Uber and Airbnb with a 3-per-cent levy on revenue from Canadian users.

It will apply retroactively, leaving U.S. companies with a US$2-billion bill due at the end of the month.

Mr. Carney will also talk to Canadian premiers Friday about Canada-U.S. negotiations, he said.

Canada has not yet retaliated against higher U.S. tariffs on Canadian steel and aluminum after Mr. Trump raised levies to 50 per cent in early June.

Mr. Carney told reporters that Canada will make a decision July 21 on whether to raise retaliatory tariffs on U.S. steel and aluminum, which are 25 per cent right now, “to levels consistent with the progress that’s made at that point on the broader trading arrangements with the United States.”

Business groups urge Carney to pause Digital Services Tax in fear of Trump backlash

Brian Clow, who served as deputy chief of staff to former prime minister Justin Trudeau and was among the leading federal officials on Canada-U.S. relations, says it makes no sense for Ottawa to axe the digital sales tax now before a deal.

“If the government is considering dropping it, they should only do it in the context of an overall deal, because if you just do it on its own, Donald Trump has shown he’s willing to pocket those kinds of gains and just ask for more things,” Mr. Clow said.

Canadian and U.S. business groups, organizations representing U.S. tech giants and American members of Congress have all signed letters calling for the tax to be eliminated or paused.

The digital sales tax imposes a 3-per-cent levy on Canadian revenue from digital services exceeding $20-million that is earned by companies with at least $1.1-billion in global revenue. This includes revenue from search engines, social-media platforms and online marketplaces.

Going forward, U.S. companies will cumulatively pay up to an estimated US$2.3-billion annually.

Rich Tachuk, president of the American Chamber of Commerce in Canada, whose membership opposes the levy, warned that the digital sales tax could undercut the Canada-U.S. trade talks and “risks derailing the agreement.”

He predicted Washington will see the tax revenue collection “before a new deal is supposed to be done isn’t a bargaining chip; it would likely be viewed as a provocation.”

Mr. Tachuk advised Ottawa to pause the tax and negotiate it away “while there is still time.”

Tim Faught, president of Posterjack, an online photo printing service, noted that Google in late 2024 imposed a surcharge on advertising fees to recoup the cost of Ottawa’s digital sales tax (DST).

He said he expects his company will pay more than $10,000 annually to Google for this DST surcharge. “Ultimately this new cost to businesses will be inflationary,” Mr. Faught said.

Matthew Holmes, executive vice-president at the Canadian Chamber of Commerce, said his members feel pausing the DST would he prudent “to keep negotiations on track and respectful.”

With reports from The Canadian Press