Canada announced Sunday that it is acquiescing to President Donald Trump’s demand to drop its digital services tax on U.S. companies to resume trade negotiations with the White House. 

Trump revealed on Friday he had cut off trade talks with Canadian Prime Minister Mark Carney due to Ottawa’s refusal to ax the tax, which was estimated to cost U.S.-based tech giants over $2 billion annually. The president called the excise fee a “direct and blatant attack on our Country” and threatened higher tariffs on imports from Canada. The tax, which went into effect in June, required large U.S. tech companies such as Apple and Google to pay a 3% tax on revenues above $20 million earned from engaging with online users in Canada. 

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In response to the president’s actions, the Canadian government said on Sunday evening it would rescind the disputed tax “in anticipation of a mutually beneficial comprehensive trade arrangement” with the United States that seeks to lift Trump’s tariffs off Ottawa. In addition, Canada will not collect the first round of payments from the tax originally set to be received on June 30, which applied retroactively and amounted to more than $2 billion from U.S.-based companies. 

With the feud behind them, the two countries have agreed to pick up trade negotiations with the hopes of reaching a new trade deal by July 21, according to Canada’s Department of Finance. 

“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Canadian Minister of Finance and National Revenue Francois-Philippe Champagne said.

Champagne’s words came after he pledged Canada was “going ahead” with implementing the tax earlier this month. 

“The [digital services tax] is in force and it’s going to be applied,” he told reporters before a Cabinet meeting. 

During a CNBC interview on Friday, Treasury Secretary Scott Bessent told CNBC that U.S. Trade Representative Jamieson Greer would investigate the tax to “determine the amount of harm to the U.S. companies and the U.S. economy in general.”

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“We disagree [with the tax], and we think that they discriminate against U.S. companies,” he said. 

“Several countries within the European Union have digital service taxes. None of them have done those retroactively,” Bessent said, adding that the retroactive digital taxes, which amount to about $2 billion, “seem patently unfair.”