UK Prime Minister Keir Starmer faced political backlash over reportedly softening tax terms for U.S. firms under Trump’s pressure.
A day after U.S. President Donald Trump threatened tariffs and export limits tied to digital services taxes, the European Union on Tuesday rejected claims that its technology rules are biased.
European Commission spokeswoman Paula Pinho said, “It’s the sovereign right of the EU and its member states to regulate our economic activities on our territory that are consistent with our democratic values.”
Trump’s warning targeted countries with digital services taxes that affect US firms. He threatened export restrictions and tariffs on advanced technology and semiconductors.
On Tuesday, he said in a post on Truth Social, saying governments whose taxes, legislation, and rules hit companies such as Google, Meta, Amazon, and Apple would face US action. “Digital taxes, legislation, rules, or regulations are all designed to harm or discriminate against American technology,” he wrote.
He singled out the UK’s digital services tax, a 2% levy on revenues that raises about £800m a year from global tech companies, and said these policies “outrageously give a complete pass to China’s largest tech companies.”
Trump threatened further retaliation
Trump added, “As the president of the United States, I will stand up to countries that attack our incredible American tech companies. Unless these discriminatory actions are removed, I, as president of the United States, will impose substantial additional tariffs on that country’s exports to the USA, and institute export restrictions on our highly protected technology and chips.”
The remarks add pressure on the UK and the EU, which both recently struck trade deals with the United States. The EU has the Digital Services Act to limit the power of large platforms, and several member states, including France, Italy, and Spain, maintain their own digital services taxes.
U.S. officials have opposed the UK’s levy, introduced in 2020 and kept in place even after a trade accord with the Trump administration was finalized in May. Trump has argued that digital services taxes harm U.S. companies.
In February, he signed an executive order titled “Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties,” which warned of retaliatory tariffs.
In April, it emerged that Prime Minister Keir Starmer had offered big US tech firms a lower tax rate to appease Trump, while applying the tax to firms from other countries.
Trump wrote on Monday, “America, and American technology companies, are neither the ‘piggy bank’ nor the ‘doormat’ of the world any longer. Show respect to America and our amazing tech companies or consider the consequences.”
EU stands firm while Canada backs Off
The sharp rhetoric came a week after the US and the EU said in a joint statement they would work together to “address unjustified trade barriers.” Before Tuesday’s press briefing, The European Commission said separately it had not committed to changing its digital regulations.
In June, Canada dropped its digital services tax as reported by Cryptopolitan, which Trump had called a “direct and blatant” attack, to help smooth trade talks with the United States.
Political pushback followed. Liberal Democrat leader Ed Davey said the government should not give in to “bullying.”
“The prime minister must rule out giving in to Donald Trump’s bullying by watering down Britain’s digital services tax,” he said. “Tech tycoons like Elon Musk rake in millions off our online data and couldn’t care less about keeping kids safe online. The last thing they need is a tax break. The way to respond to Trump’s destructive trade war is to work with our allies to stand up to him.”
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