On June 29, 2025, the Department of Finance Canada announced that the digital services tax payment due the next day would not be collected and that legislation to repeal the tax would follow. The release gave one reason. Canada was dropping the tax to advance “a mutually beneficial comprehensive trade arrangement with the United States,” and it named July 21, 2025 as the target date for reaching that arrangement.
The target date passed a year ago. On July 1, 2026, the Office of the United States Trade Representative issued a statement of a few sentences saying the United States did not agree to renew the Canada-United States-Mexico Agreement in its current form. The agreement stays in force. It now does so one annual review at a time.
This week the trade representative, Jamieson Greer, explained at the Aspen Security Forum how Washington had scored the repeal. In his words, Canada does not “really get credit for doing something bad and then undoing it.” That is the position of the government Canada was trying to persuade, stated in public, twelve months after the concession was made.
Key facts
- The Department of Finance Canada announced on June 29, 2025 that Canada would rescind its Digital Services Tax, halt the collection due June 30, 2025, and pursue a trade arrangement with the United States by July 21, 2025.
- The Office of the United States Trade Representative stated on July 1, 2026 that the United States did not agree to renew the Canada-United States-Mexico Agreement in its current form.
- On July 17, 2026, the same office announced a third bilateral negotiating round with Mexico, set for July 21 to 23, 2026 in Mexico City.
- Statistics Canada reported on February 19, 2026 that Canada’s merchandise trade surplus with the United States was $81.6 billion in 2025, down from $101.3 billion in 2024.
- Global Affairs Canada reports that Canadian energy exports to the United States fell by $12.3 billion, or 7.2%, in 2025, mainly because of lower crude oil prices.
What the repeal bought and what Washington has scheduled since
The repeal was a unilateral act. It removed a tax that American technology firms and the administration had objected to, and it carried no reciprocal term, because a domestic repeal cannot bind a foreign government to anything. The release described a negotiation. The instrument delivered a concession, and a concession made before talks begin is recorded by the other side as the new starting line.
The July 1 statement shows where that starting line now sits. It says the United States “will continue to engage with Mexico and Canada,” and the only negotiating round it schedules is with Mexico, for the week of July 20. The text names one partner for talks and two for engagement, and those are different commitments.
Mexico’s third formal round opens in Mexico City next week. Canada has weekly contact with the trade representative’s office and no text-based negotiation. The distance between those two positions is the practical measure of what the repeal achieved.
Why the energy ledger decides the deficit Washington keeps citing
The two governments measure the trade balance differently, and the figures should be read separately. The Office of the United States Trade Representative puts the American goods deficit with Canada at US$48.3 billion for 2025. Statistics Canada puts Canada’s merchandise surplus with the United States at $81.6 billion for the same year. Neither number should be averaged with the other.
What both ledgers share is the weight of energy. Global Affairs Canada reports that energy exports to the United States fell by $12.3 billion, or 7.2%, in 2025. By our arithmetic, that places the 2025 value at roughly $158 billion, close to double the entire Canadian surplus. Canada also imports American energy, so the net figure is smaller, but the surplus Washington complains about rests on crude oil and natural gas moving south.
That is the part of this file that belongs to Alberta. The product that produces the imbalance is the product American refiners buy because they need it, and the trade representative’s comment that the two countries will keep trading simply because of proximity understates how much of that trade is a supply relationship. The weakness in Canada’s position is that the supplier has one large customer. The pipeline proposal now on the federal Major Projects Office desk and the routes with buyers that a federal statute still blocks are where that weakness is either repaired or kept.
What happens next under an agreement reviewed every year
Under the agreement’s review clause, a failure to confirm renewal triggers joint reviews every year until the parties agree or the agreement expires on July 1, 2036. Every Canadian exporter operating under it now plans against a twelve-month horizon. Investment decisions that assume market access beyond the next review carry a risk that did not exist before July 1.
Ottawa’s approach to date has been to remove irritants in advance and wait for the counterparty to reciprocate. The counterparty has now said, on the record, that it does not count removed irritants as concessions. A strategy built on that expectation needs a different instrument, and the only instrument Canada holds in quantity is supply the United States cannot quickly replace, sold to more than one buyer.
The next joint review falls on July 1, 2027. Until then, the digital services tax that Canada repealed in 2025 does not appear on the American side of the ledger, and Canadian exporters carry the cost of the uncertainty.
