UK refuses to back down on US tech tax despite Trump’s tariff threat
Sir Keir Starmer has refused to back down on Britain’s tax on American social media companies despite Donald Trump’s threat to respond with tariffs.
The digital services tax, introduced in 2020, imposes a 2 percent tax on the revenues of many large U.S. tech companies; Downing Street insisted it was “fair and proportionate”.
Speaking to reporters from the Oval Office on Thursday, Mr Trump warned that the US could “very easily retaliate by putting a huge tariff on the UK, so they better be careful.”
“If they don’t reduce the duty, we will probably impose a huge tariff on the UK,” he said.
However, Britain responded by saying its stance on the issue had not changed.
Asked about Mr Trump’s threats, the Prime Minister’s official spokesman said: “Our position on this has not changed. This is a hugely important tax to ensure that these businesses continue to pay their share. So it is a fair and proportionate approach to taxing business activities in the UK.”
The tax targets companies whose worldwide revenue from digital activities exceeds £500 million, with more than £25 million coming from users in the UK.
The tax increased by more than £800 million in 2024-25, from £678 million in 2023-24, according to the 2025 Treasury review.
Mr Trump argued the laws, which have long been a source of tension in UK-US relations, target “the world’s leading companies”.
“England did it, a few others did it,” he said. “They think they’ll make easy money, so they’re all taking advantage of our country.”
The digital services tax remains unchanged under the UK-US trade deal agreed in May 2025, despite being a hotly debated topic.
Asked how high any retaliatory tariffs would be, the president said it would be “more than what they get” from the tax.
“We will respond by putting something equal or greater than what they did,” he said.
The latest revelations add to wider tensions in UK-US relations, which deteriorated after Sir Keir Starmer rejected Britain’s involvement in the Iran war.
Downing Street on Friday was forced to respond following reports that the US may review its claim to the Falkland Islands as revenge for Britain’s lack of support in the Iran war.
The No 10 responded to the reports by saying the UK’s position on the Falklands “will not change” and that “sovereignty remains with the UK”.
Meanwhile, earlier this month Mr Trump suggested in an interview with Sky News that the terms of the UK-US trade deal brokered last year “could always be changed”.
Mr. Trump’s latest threats about a digital services tax come months after similar U.S. threats to impose new tariffs and export controls on countries with digital taxes or regulations affecting American tech giants.
Some European countries such as France, Italy and Spain have a digital services tax.
In an August 2025 post on Truth Social, Mr. Trump said he would “stand up to countries that attack our incredible American Tech Companies.”
“Digital Taxes, Digital Services Regulations, and Digital Market Regulations are all designed to harm or discriminate against American Technology,” he wrote.
“This must end,” he said, promising to “impose significant additional tariffs” on the offending country’s exports to the United States “unless these discriminatory acts are eliminated.”
Liberal Democrat leader Sir Ed Davey said: “Now Trump is threatening to hit Britain with tariffs unless we capitulate and cut tariffs for US tech barons like Elon Musk.
“Why is Keir Starmer rewarding this bullying behavior with a state visit from the King?”
