WASHINGTON / LONDON - President Donald Trump threatened to impose substantial tariffs on the United Kingdom unless it eliminates its digital services tax targeting American technology companies. Speaking from the Oval Office on Thursday, Trump was blunt about his intentions.
"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," Trump told reporters. "If they don't drop the tax, we'll probably put a big tariff on the UK."
The threat marks the latest escalation in a simmering dispute between Washington and London over the UK's 2% levy on digital revenues generated by major tech companies. The tax applies to search engines, social media platforms, and online marketplaces with global digital revenues exceeding 500 million pounds and more than 25 million pounds from UK users. In practical terms, it targets Apple, Google, Meta, Amazon, and Microsoft.
The Revenue at Stake
According to a 2025 Treasury review, the digital services tax levy raised more than 800 million pounds ($1.08 billion) in 2024-25, up from 678 million pounds the previous year. Projections for 2025-26 put the figure at 944 million pounds, with cumulative revenue between 2024 and 2029 expected to reach between 4.4 and 5.2 billion pounds.
For the UK Treasury, this is not a trivial line item. It is a meaningful revenue source at a time when the Starmer government is under intense pressure to fund public services without raising income taxes. Dropping the levy would create a hole in the budget that would need to be filled by other means.
London's Response
Prime Minister Keir Starmer's office pushed back firmly. A Downing Street spokesperson stated that the government's position "is unchanged. 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 UK government has consistently argued that digital services taxes are a temporary measure designed to remain in place until an international agreement on digital taxation is reached through the OECD. That agreement has been languishing for years, with the United States resisting any framework that would disproportionately affect its tech sector.
Broader Trade Implications
Trump has made similar threats to other European countries with comparable digital levies, including France, Italy, and Spain. In a Truth Social post from August 2025, he vowed that "unless these discriminatory actions are removed, I will impose substantial additional tariffs."
The tariff threat complicates an already strained relationship. The UK-US trade deal signed in May 2025 left the digital services tax unchanged, despite it being a major point of discussion during negotiations. Trump recently suggested the agreement "can always be changed," signaling his willingness to revisit terms he finds unfavourable.
The timing is particularly sensitive. King Charles III and Queen Camilla are scheduled for a four-day state visit to the US beginning April 28. Trump suggested the visit could help repair relations, though the digital tax dispute suggests the agenda will be more contentious than ceremonial.
The Iran Factor
The tariff threat comes alongside broader UK-US tensions over the Iran conflict. The UK has refused to participate in offensive military operations against Iran, taking only a defensive posture. Trump publicly criticized this decision, suggesting that Prime Minister Starmer lacks the backbone of historical British leaders. The combination of military disagreement and trade threats represents the most significant strain in the "special relationship" since the Brexit negotiations.
For markets, the immediate impact has been limited. Sterling traded flat against the dollar following the announcement, suggesting that investors view the threat as negotiating rhetoric rather than imminent policy. But if tariffs are actually applied, the consequences for UK exporters, particularly in financial services, automotive, and luxury goods, could be severe.
Trump did not specify a tariff percentage, but he indicated the goal would be to generate "more than what they're getting" from the digital tax. Given that the levy raises approximately $1 billion annually, the implied tariff rate would need to be substantial to achieve that target.
For more on US trade policy developments, see our Economy section. For the impact of trade tensions on markets, read our latest market analysis.