Sir Keir Starmer has refused to back down on Britain’s tax on American social media firms, despite Donald Trump threatening to hit back with tariffs.
The digital services tax, introduced in 2020, imposes a 2 per cent levy on the revenues of several major US tech companies – something Downing Street has insisted is “fair and proportionate”.
Speaking to reporters from the Oval Office on Thursday, Mr Trump warned the US could retaliate “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,” he said.
But the UK has hit back, saying its position on the matter has not changed.
Asked about Mr Trump’s threats, the prime minister’s official spokesperson said: “Our position on that 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 tax targets companies whose worldwide revenues from digital activities exceed £500m, with more than £25m of the revenue from UK users.
According to a 2025 Treasury review, the levy raised more than £800m in 2024–25, up from £678m in 2023–24.
Mr Trump argued the laws, which have long been a source of tension in UK-US relations, targeted “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 digital services tax went unchanged under the UK–US trade deal agreed in May 2025, despite being a hot topic of discussion.
Asked how high any retaliatory tariffs 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 UK-US relations, which have deteriorated after Sir Keir Starmer ruled out British involvement in the Iran war.
On Friday, Downing Street was forced to respond following reports that the US could review Britain’s claim to the Falkland Islands as revenge for a lack of support in the Iran war.
No 10 hit back at the reports, insisting the UK’s position on the Falkland Islands “isn’t going to change” and that “sovereignty rests with the UK”.
Meanwhile, earlier this month, Mr Trump suggested the terms of the UK-US trade agreement brokered last year “can always be changed” in an interview with Sky News.
Mr Trump’s latest threats relating to the digital services tax come 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 from August 2025, Mr 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.
Liberal Democrat leader Sir Ed Davey said: “Now Trump is threatening to hit Britain with tariffs unless we give in and slash taxes for US tech barons like Elon Musk.
“Why is Keir Starmer rewarding this bullying behaviour with a state visit from the King?”
