Donald Trump has warned he will slap a 100 per cent tariff on all British goods entering the United States if the UK presses ahead with its digital services tax on American technology companies. Writing on Truth Social, the US president said the levy would “supersede” any existing trade deals and be imposed “immediately” if the UK or any other country proceeds with the charge.
“Numerous European Countries have been discussing the imminent implementation of a Digital Services Tax on American Companies,” Trump posted. “Some of these countries are close to actually doing this. Please let this statement serve to represent that any country that imposes such a tax will immediately be met with a 100 per cent tariff on any and all goods sent to the United States of America. This tariff will supersede trade deals made with the country, whether implemented, signed, or not. Additionally, the 100 per cent TARIFF will be immediately imposed if they proceed.”
The threat is the latest in a series of warnings from the Trump administration over foreign digital services taxes. In February 2025, Trump signed a memorandum directing US agencies to propose retaliatory measures, including tariffs, against countries it says discriminate against American tech firms. That memo, titled “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties,” has been linked to broader trade actions, with reports suggesting the administration is preparing to impose global trade barriers — including a 25 per cent levy on car imports that has been dubbed “Liberation Day” tariffs.
How the UK’s digital services tax works
The UK’s digital services tax (DST) was introduced on 1 April 2020 as an interim measure to ensure large multinational technology companies contribute more to the UK tax system. Traditional corporation tax rules were not designed for the digital economy, allowing firms based overseas to generate significant revenue from UK users while paying minimal tax through profit-shifting strategies. The DST is a 2 per cent levy on the revenues of search engines, social media platforms and online marketplaces that derive value from UK users.
The tax applies to companies or groups with worldwide revenues from digital activities exceeding £500 million, and with at least £25 million of those revenues coming from UK users. The first £25 million of UK-derived revenue is tax-free. Among the companies affected are Apple, Facebook and Instagram owner Meta, Alphabet’s Google, Amazon, eBay and TikTok. Some of these firms have reportedly passed on the cost of the DST to advertisers or consumers, which could indirectly affect smaller UK businesses that rely on these platforms for advertising or sales.
The DST was always intended to be temporary, to be replaced by a global framework for taxing the digital economy. The OECD’s “Two Pillar” initiative was designed to provide that solution, but its implementation has faced repeated delays. As a result, the UK’s interim tax remains in place.
According to a 2025 Treasury review, the DST raised approximately £800 million in the 2024–25 financial year, up from £678 million in 2023–24. Some estimates suggest it could generate between £4.4 billion and £5.2 billion between 2024 and 2029.
Public support for higher taxes on big tech
Despite the threat of US retaliation, a clear majority of the British public wants the government to go further. A survey conducted by the Fair Tax Foundation found that 67 per cent of respondents believe the government should charge higher digital services taxes on multinational technology groups “to increase their overall tax contribution in the UK”. Paul Monaghan, the foundation’s chief executive, said: “This research demonstrates that the UK is still at its core a fair tax nation. The UK public care about many issues, but ‘tax justice’ is consistently at the top of their concerns when it comes to corporate conduct. They want to see government do much more to ensure that all businesses, both large and small, pay their fair share of tax.”
The Labour government has pledged not to increase corporation tax above 25 per cent and to retain full capital expensing, while also committing not to raise national insurance contributions or income tax rates. However, Labour has indicated it is willing to take steps if tax changes in other countries pose a risk to UK competitiveness. There have been reports that the UK government is prepared to reduce the DST rate to placate the White House. Canada recently rescinded its digital tax in anticipation of a trade arrangement with the US, suggesting a potential path the UK could follow.
