The United States resumed trade negotiations with Canada Monday morning, after the country scrapped its tax targeting large technology firms.

Prime Minister Mark Carney said he spoke with U.S. President Donald Trump on the phone Sunday evening. He said they decided to continue with negotiations, with the previously agreed-upon July 21 deadline still in mind. 

Carney said the decision to remove the digital services tax (DST) "is part of a bigger negotiation" with the U.S.

"It is something we expected, in the broader sense, that would be part of a broader deal," said Carney.

He said it "doesn't make sense" to collect the tax now and have to remit it at a later date.

WATCH | Carney comments on talks resuming: 

Canada and U.S. restarted negotiations Monday morning, Carney says

Prime Minister Mark Carney says he had a ‘good’ conversation with U.S. President Donald Trump on Sunday, and that the two leaders will keep working to reach a deal by July 21. The federal government scrapped the digital services tax over the weekend after Trump paused all trade talks on Friday.

White House Press Secretary Karoline Leavitt said the prime minister "caved" to Trump. 

"President Trump knows how to negotiate," said Leavitt. "It was a mistake for Canada to vow to implement that tax that would have hurt our tech companies here in the United States."

Trump said Friday he was ending all U.S. trade discussions with Canada because of the DST, which would have seen companies like Amazon, Google, Meta, Uber and Airbnb pay three per cent on revenues from Canadian users.

With tax collection set to begin Monday, the policy would have left U.S. companies with a $2-billion US retroactive bill due at the end of the month.

Despite the move, Canada is still in active discussions with G7 allies to introduce an international tax, with Finance Minister François-Philippe Champagne leading that work, the PMO said.

"President Trump has once again leveraged the power of the American economy, the best and biggest in the world, to deliver a victory for American industries and workers," White House spokesperson Kush Desai said in a statement to CBC News on Monday.

WATCH | Lutnick thanks Canada: 

U.S. commerce secretary thanks Canada for removing 'deal breaker' digital tax

In a social media post, U.S. Commerce Secretary Howard Lutnick thanked Canada for rescinding the Digital Services Tax on American tech companies, saying such a tax was a 'deal breaker for any trade deal with America.'

U.S. Commerce Secretary Howard Lutnick shared a statement on social media on Monday morning praising Canada's decision to scrap the tax. 

"Thank you Canada for removing your digital services tax, which was intended to stifle American innovation and would have been a deal-breaker for any trade deal with America," he wrote on X.

Conservative Leader Pierre Poilievre said on social media Monday that Carney put his "elbows down" by cancelling the tax "at the 11th hour."

He said that the prime minister should insist the U.S. immediately rescind softwood lumber tariffs in exchange. 

"We need to make gains for our workers in these talks," Poilievre said on X.