US-UK rift deepens as Trump threatens ‘big tariffs’ in digital services tax dispute

President Donald Trump has issued a stark warning to Britain, threatening to impose “big tariffs”, marking the worsening of relations in coming months.

At the heart of the issue is the UK digital service tax policy which imposed a 2 percent levy on the revenues generated by the major US digital media companies.

Under this policy, only those companies are eligible to pay the tax whose global revenues from digital activities surpass £500 million, with more than £25 million of the revenues from UK shares.

The UK introduced this digital tax policy in 2020 and now the US wants Britain to drop this completely.

Talking to the reporters from the Oval Office, Trump said, “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.

“If they don’t drop the tax, we’ll probably put a big tariff on the UK.”

Trump also argued that these laws are made only to target top US companies in the world. He accused the UK and other countries of making such discriminatory laws to take advantage of our country.

“They think they’re going to make an easy buck, that’s why they’ve all taken advantage of our country,” he added.

When asked how big this tariff would be, Trump answered, ““more than what they’re getting from the levy.”

Trump said, the US will reciprocate and the impact will either be equal or greater than what Britain is doing.

When the US and UK reached a landmark trade deal in May 2025, the digital services tax remained unchanged despite being the part of discussions.

Since the start of the US-Iran war, the US relations with the UK has also deteriorated as UK PM Keir Starmer ruled out any possibility of involvement in the Middle East conflict. Starmer also rejected the US request of using UK bases in the Middle East to launch the attacks. 

Downing Street is yet to comment on the US president's remarks.