US President Donald Trump has warned Britain it will face heavy trade tariffs if it refuses to scrap a tax on American technology companies, piling fresh pressure on a relationship already strained by disagreements over the war in Iran.
Speaking from the Oval Office on Thursday, Trump said Washington could respond to the UK’s digital services tax by imposing steep import duties on British goods. “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,” he told reporters. “If they don’t drop the tax, we’ll probably put a big tariff on the UK.”
The digital services tax, introduced by the UK government in 2020, levies a 2% tax on the revenues of large US tech firms, including Amazon, Google, and Apple.
It applies to companies earning more than £500 million globally from digital activities, provided at least £25 million of that comes from UK users.
While those companies often pass the cost on to the third-party sellers and businesses using their platforms rather than absorbing it themselves, the tax raises more than most of them pay in UK corporation tax. A 2024 estimate by Tax Justice UK put the total yield at between £4.4 billion and £5.2 billion for 2024-2029.
The tax is here to stay, as per Downing Street. “Our position on that is unchanged,” the prime minister’s official spokesperson said. “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.”
The tax was never meant to be permanent
The UK agreed in 2021 to replace it once a broader international deal took effect. Under an arrangement brokered by the Organization for Economic Co-operation and Development among 140 countries, large multinationals would pay tax where they do business, with a minimum corporation tax rate of 15%. That plan was due to take effect in 2024, but has been held up by continued objections from several countries.
Trump said the tax was aimed squarely at the best 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.”
When asked what size tariff he had in mind, he said it would match or exceed whatever the UK collects. “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 digital services tax survived the UK-US trade deal struck in May 2025, even though it was raised during those talks.
France, Italy, and Spain also operate similar taxes. In August 2025, Trump posted on Truth Social that he would protect American tech companies from what he called discriminatory foreign levies. “Digital taxes, digital services legislation, and digital markets regulations are all designed to harm, or discriminate against, American technology,” he wrote, warning of “substantial additional tariffs” unless such measures were removed.
A weakening economy makes any concession harder to stomach
The UK parliament has already raised doubts about whether economic ties with the US are beneficial. Last week, the Business and Trade Committee launched a formal inquiry into this matter. It stated that the US accounts for 17% of the UK’s total trade, while exports stand at 22%. However, the fruition of the Economic Prosperity Deal remains deeply uncertain.
Committee chair Liam Byrne said businesses need “more predictability”. He warned the UK may fall behind without a clear strategy.
This risk was also highlighted by the IMF recently. It had cut Britain’s 2026 growth forecast by 0.5 percentage points. Worst of all in the G7 nations. Inflation is expected to hit 4%, with unemployment reaching levels not seen in more than a decade. The reason? The UK’s dependency on gas for power generation, and that’s where the Iran conflict is hitting it the most, according to the IMF’s chief economist.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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