US President Donald Trump has threatened to impose tariffs on the United Kingdom unless it scraps its digital services tax on American tech companies.
“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 said, speaking from the Oval Office.
“If they don’t drop the tax, we’ll probably put a big tariff on the UK,” he continued.
Here’s what you need to know about the levy seems to have Washington rattled.
What is the Digital Services Tax?
The UK introduced its Digital Services Tax (DST) on 1 April 2020, imposing a 2% levy on revenues from social media platforms, search engines and online marketplaces that derive value from UK users.
It applies to companies whose worldwide revenues from digital activities exceed £500m (€576m), with more than £25m (€28.75m) of those revenues derived from UK users.
The tax raised £944m (€1.1bn) from tech companies in 2025-26, up 17% on the amount collected a year earlier, according to UK revenue and customs figures.
The DST was originally introduced as a stopgap measure, pending an international agreement to reform the global tax framework — an agreement that never materialised.
The UK government describes it as an interim measure and has committed to scrapping it once an appropriate global solution on the reallocation of taxing rights is in place.
The Treasury’s position is that the tax applies to businesses, not countries, and is agnostic to where a company is headquartered.
Introduced in 2020, it applies to companies such as Alphabet’s Google, Meta and Amazon.
Apple’s App Store may also fall within scope as an online marketplace, although UK tax authorities have never publicly confirmed which companies pay the tax.
Why is Trump taking aim?
This is not the first time Trump has gone after the UK’s digital services tax and his predecessor Joe Biden also took issue with the levy.
Speaking on Thursday, Trump said the tax exploits “the top companies in the world”.
“They think they’re going to make an easy buck, that’s why they’ve all taken advantage of our country,” he told reporters.
“I don’t like it when they target American companies, because basically, you’re talking about our great American companies — whether we like those companies or don’t like them, they’re American companies and the top companies in the world. The UK did it, a couple of other people did it,” he siad.
Asked about how high a retaliatory tariff would be, Trump 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 explained.
Where else have similar taxes been implemented?
Several European countries also have a digital services tax (DST). France, Spain, Italy, Austria, Denmark, Hungary, Poland and Portugal have introduced them.
Outside the European Union, Switzerland and Turkey have also implemented such taxes.
While many of the digital services taxes mainly apply to online advertising, the UK’s DST targets social media platforms, internet search engines, and online marketplaces.
The European Union also has the Digital Markets Act, which regulates the largest companies to ensure fair competition and to prevent anti-competitive practices in the digital market.
In August, Trump wrote on his social media platform that 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. This must end,” he added, vowing substantial tariffs unless they were removed.