Trump threatens tariffs on UK over digital services tax

Donald Trump has threatened to impose new tariffs on the UK unless it drops its digital services tax, reopening a dispute that British officials had hoped was contained by last year’s trade agreement.

Speaking in the Oval Office on Thursday, Trump said the US could “meet that very easily by just putting a big tariff on the UK” if London keeps the levy, according to the Evening Standard. The tax, introduced in 2020, applies a 2% charge on revenues from certain digital activities for companies with global revenues above £500 million and more than £25 million linked to UK users—thresholds that capture major US platforms.

The immediate leverage is simple: the UK collects a relatively small, predictable stream from a narrow group of firms; the US can threaten broad, blunt costs on unrelated British exports. Trump framed the tax as foreign governments trying to “make an easy buck” off “top companies in the world”, the Standard reports, and said any tariff would be “equal or greater than what they’re doing”. That formulation treats a targeted domestic tax measure as a bilateral toll—something to be offset at the border rather than debated through tax treaties or the OECD’s long-running talks on digital taxation.

The episode also highlights how trade deals can leave the hardest issues untouched. The UK–US agreement reached in May 2025 did not remove or amend the digital services tax, despite years of US complaints, the Standard notes. That omission effectively parked the dispute for later, leaving Washington free to revive it when politically useful.

For Britain, the risk is not only the tariff number but the precedent. If a domestic tax aimed at a handful of foreign firms triggers sector-wide retaliation, future UK policy choices—from online regulation to competition rules—can be priced as potential trade penalties. Trump has previously bundled “digital taxes” with broader European technology regulation, warning of “substantial additional tariffs” unless such measures are removed, according to the Standard’s report.

The threat lands amid wider strains in the relationship. The Standard reports that Prime Minister Keir Starmer has faced US pressure over the Iran war and has publicly ruled out British involvement, telling parliament this month that the conflict was “not our war” and that he would not “yield”.

The UK’s digital services tax is set at 2%. Trump’s suggested response is not a percentage at all, but whatever tariff level makes the argument go away.