US President Donald Trump has warned Britain that he will impose a “big tariff” on the United Kingdom unless it scraps its Digital Services Tax, which he says unfairly targets American technology companies.
Speaking to reporters from the Oval Office on April 23, Trump said: “We’ve been looking at it, and we can meet that very easily by just putting a big tariff on the UK. So they better be careful. If they don’t drop the tax, we’ll probably put a big tariff on the UK.”
The UK’s Digital Services Tax, introduced in 2020, levies a 2 per cent charge on the UK revenues of large search engines, social media platforms and online marketplaces.
It applies to companies with global digital revenues exceeding £500 million (€576 million) and more than £25 million (€29 million) generated from UK users.
Major US firms including Google, Meta, Amazon and Apple are among those affected.
The Digital Services Tax was designed as an interim measure.
In 2021, the UK Government agreed to phase it out in order to avert retaliatory US tariffs on British goods. The levy was supposed to be replaced by a new global tax system under an OECD-brokered agreement backed by more than 140 countries and jurisdictions, including the UK.
That deal was intended to make large multinational companies pay more tax in the countries where they generate revenue, while also establishing a global minimum corporation tax rate of 15 per cent.
Implementation has been repeatedly delayed amid objections from several countries, leaving the UK tax in place.
Trump has argued that such laws unfairly target “the top companies in the world”.
HM Revenue & Customs figures released this week show the tax raised £944 million (€1.09 billion) in the 2025-26 fiscal year, up 17 per cent on the previous year. Forecasts suggest it could generate up to £1.4 billion (€1.61 billion) annually by 2030.
The levy has long been a point of contention in US-UK relations.
It remained in place despite the trade agreement reached between the two countries in May 2025.
Trump has repeatedly criticised similar digital taxes worldwide, arguing they discriminate against American innovation while sparing competitors such as Chinese tech giants.
The threat comes amid broader US efforts to protect domestic technology companies, including Google, Meta, Amazon and Apple, from what the administration views as overseas “extortion”.
In August 2025, Trump publicly warned all countries imposing digital services taxes, legislation or regulations, explicitly targeting EU member states as well as the bloc’s broader Digital Services Act and Digital Markets Act.
Several EU countries, including France and Spain, have digital services taxes of their own.
Trump warned that they faced “substantial additional tariffs” on their exports to the United States and restrictions on American technology and chip exports unless the measures were removed.
The dispute places Britain in a difficult position. Scrapping the tax would remove a major irritant in relations with Washington but would also deprive the Treasury of a fast-growing source of revenue at a time of heavy pressure on the public finances.
Keeping it, however, risks provoking a new trade clash with the United States, Britain’s single largest national trading partner and a key ally at a moment of wider geopolitical strain.
For London, the question is whether a tax originally presented as temporary has now become too politically and fiscally useful to abandon. For Washington, the issue is simpler: Trump sees the measure as a direct attack on American corporate power and has made clear he is willing to answer it with tariffs.
Cross-party members of the European Parliament and free speech advocates gathered in the European Parliament on Wednesday to urge the European Commission to review the Digital Services Act. https://t.co/plQaNkN3ml
— Brussels Signal (@brusselssignal) May 22, 2025
