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President Trump has warned of significant tariffs on the UK if it doesn't abolish its digital services tax targeting American tech giants. This 2% levy, introduced in 2020, has generated substantial revenue for Britain. The threat escalates existing trade tensions and comes amid broader diplomatic pressures, potentially impacting a UK-US trade deal and defense relations.
US President Donald Trump has threatened to impose a "big tariff" on the United Kingdom if it refuses to scrap its digital services tax on American technology companies, escalating tensions between Washington and London that have been simmering for years."I don't like it when they target American companies, because basically, you're talking about our great American companies—whether we like those companies or don't like them, they're American companies and the top companies in the world," Trump told reporters from the Oval Office on Thursday. "If they don't drop the tax, we'll probably put a big tariff on the UK."Asked how steep that tariff would be, Trump left little ambiguity: "More than what they're getting," he told The Telegraph.
What is the UK's digital services tax
The UK introduced its Digital Services Tax in April 2020—a 2% levy on revenues from social media platforms, search engines, and online marketplaces that profit from British users. It only kicks in once a company clears £500 million in global revenues, making it squarely a Big Tech problem. According to HM Revenue and Customs figures, the tax pulled in £944 million in 2025-26—a 17% jump from the year before and, per The Telegraph, the largest digital services tax haul in the world.
The UK government has long described it as a stopgap, pending a global tax agreement brokered through the OECD. That agreement, involving 140 countries, has been stuck in delays, and the Trump administration has been openly hostile to it.
Where does this leave UK-US relations
The threat lands at a delicate moment. Trump's latest broadside comes weeks after he suggested in a Sky News interview that the UK-US trade deal—struck in May 2025—"can always be changed."
The digital services tax survived that deal intact, but its days may be increasingly numbered given Washington's impatience.Adding to the pressure: the Pentagon is reportedly exploring options to "punish" NATO allies it feels didn't support US operations during the Iran war, with Britain among those in the frame over air base access.Trump's comments also came ahead of King Charles's state visit to the US next week—which the president suggested could help repair a relationship that has visibly frayed.Chancellor Rachel Reeves has so far resisted calls to drop the tax entirely.
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