Donald Trump has threatened to impose “a big tariff” on the UK if it does not drop its digital services tax on US technology companies.
The digital services tax, introduced in 2020, imposes a 2% levy on the revenues of several big US tech giants.
Speaking to reporters from the Oval Office on Thursday, the US president 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 tax targets companies whose worldwide revenues from digital activities exceed £500m ($673m), with more than £25m of the revenues from UK users.
While it raises more than most of the targeted businesses pay in UK corporation tax, Amazon, Google and Apple pass the tax on to the bills of the third-party businesses and sellers that use their sites.
Last year, Tax Justice UK estimated that the tax would generate £4.4bn-£5.2bn between 2024 and 2029.
On Friday, Downing Street said that the UK does not intend to scrap the digital services tax despite the threat of US tariffs.
“Our position on that is unchanged,” said the prime minister’s official spokesperson. “It is a hugely important tax to make sure that those businesses continue to pay their share. So it is a fair and proportionate approach to taxing business activities in the UK.”
However, the digital services tax is only meant to be an interim measure, and the UK government agreed in 2021 to phase it out, averting the threat of retaliatory tariffs on British products from the US.
The tax was meant to be replaced in 2024 with a new global system after the Organisation for Economic Cooperation and Development (OECD) brokered a deal between 140 countries, including the UK, that proposed large multinational companies paying tax in the countries where they do business committed themselves to a minimum 15% corporation tax rate. Implementation has been beset with delays as a number of countries have continued to raise objections over the regime.
Trump argued the laws, which have long been a source of tension in UK-US relations, targeted the “top companies in the world”.
“The UK did it, a couple of other people did it,” he said. “They think they’re going to make an easy buck, that’s why they’ve all taken advantage of our country.”
The DST went unchanged under the UK-US trade deal agreed in May 2025, despite being a point of discussion.
Asked how high the tariff would be, the president said it would be “more than what they’re getting” from the levy. “What we’ll do is we’ll reciprocate by putting something on that’s equal or greater than what they’re doing,” he said.
The latest remarks add to wider strains in US-UK relations, which have deteriorated after Keir Starmer ruled out UK involvement in the Iran war.
Earlier this month, Trump suggested in an interview with Sky News that the terms of the UK-US trade deal brokered last year “can always be changed”.
Trump made the comments months after similar US threats to impose new tariffs and export controls on countries with digital taxes or regulations affecting American tech giants. A number of European countries, such as France, Italy and Spain, have a digital services tax.
In a post on Truth Social in August 2025, Trump said he would “stand up to countries that attack our incredible American tech companies”.
“Digital taxes, digital services legislation, and digital markets regulations are all designed to harm, or discriminate against, American technology,” he wrote.
“This must end,” he said and vowed that “unless these discriminatory actions are removed”, he would “impose substantial additional tariffs” on the offending nation’s exports to the US.
On Friday, it also emerged that Pentagon officials were exploring options for “punishing” Nato allies it believes failed to adequately support US operations in the Middle East, including reviewing the US position on the UK’s claim to the Falkland Islands.
A US official told Reuters of the existence of an internal Pentagon email outlining the options, which also included suspending the Nato membership of Spain, which has been highly critical of the US action in Iran. Within Nato’s treaty, there is no mechanism for a single member or Nato itself to suspend a member country.
The policy options were detailed in a note expressing frustration at some allies’ perceived reluctance or refusal to grant the US access, basing and overflight rights – known as ABO – for the Iran war.
“As President Trump has said, despite everything that the United States has done for our Nato allies, they were not there for us,” said Kingsley Wilson, the press secretary at the Pentagon, in response to the publication of the existence of the email.
“The War Department will ensure that the president has credible options to ensure that our allies are no longer a paper tiger and instead do their part. We have no further comment on any internal deliberations to that effect.”
The prime minister’s official spokesperson said the UK will retain sovereignty over the Falkland Islands.
“The UK position is clear and isn’t going to change,” said the spokesperson. “It’s a longstanding one … The Falkland Islands have hugely voted overwhelmingly in favour of remaining a UK overseas territory, and we’ve always stood behind the islanders’ right to self-determination and the fact that sovereignty rests with the UK. We’ve expressed that position clearly and consistently.”
