US Hits Pause on Implementing UK Trade Deal Amid Disagreement on Digital Regs

Britain’s digital services tax and online safety rules remain a particular source of U.S. frustration, per the Times.

A U.K. government spokesperson declined to comment on the specific claims, but told the BBC, “our special relationship with the U.S. remains strong and the U.K. is firmly committed to ensuring the Tech Prosperity Deal delivers opportunity for hardworking people in both countries.”

The agreement had been hailed as “historic” by British Prime Minister Keir Starmer. “This Tech Prosperity Deal marks a generational step change in our relationship with the US, shaping the futures of millions of people on both sides of the Atlantic,” he said at the time it was signed. Technology secretary Liz Kendall said the partnership would “transform lives across Britain” and was a “vote of confidence in Britain’s booming AI sector.”

The technology deal was documented in a Memorandum of Understanding (MoU) between the two countries in conjunction with a broader trade agreement intended to head off punitive tariffs on the U.K. threatened by President Donald Trump. But the language of the MoU was ambiguous, per the Times, stipulating it only “becomes operative alongside substantive progress being made to formalize and implement” the broader trade agreement, called the Economic Prosperity Deal.

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To date, however, the U.K. has not lowered its digital services tax, which falls heavily on U.S. companies like Google, Amazon and Microsoft. Nor has it increased agricultural imports from the U.S. as promised in the agreement.

In the wake of the deal, U.S. technology companies including Microsoft, Google and Nvidia pledged to invest more than $40 billion in the U.K. for AI data centers and supercomputers, and to extend research collaborations and deepen commercial ties.

It was unclear whether or how the U.S. pause in implementing the agreement would affect those planned investments.

The May agreement was the first of 15 limited bi-lateral trade deals the Trump administration has reached since announcing steep new tariffs on dozens of countries since taking office. The U.S. has also sought to use its trade leverage to extract concessions on digital regulations the White House views as unfairly targeting U.S. technology companies.

In addition to the U.K., the Trump administration has clashed with the European Union over its suite of digital regulations including the Digital Services Act, Digital Markets Act, AI Act and Data Act.

Allie Renison, director of communications firm SEC Newgate U.K. and a former government trade adviser, told the BBC the current impasse over tech reflected the U.S. and U.K.’s “slightly piecemeal approach” to inking trade deals. “Instead of having everything done at once, different areas are being linked to different parts,” she said, meaning separate trade categories may now be affecting tech agreements.