President Trump and his government representatives are understood to be unhappy over the UK’s 2% levy on digital services giants, as well as other issues in areas including agricultural policy

The US government has paused a promised investment of over £30bn into the UK tech sector over disagreements on trade policy.

The trade deal, which was announced in September when Donald Trump made a state visit to the UK, was lauded at the time by prime minister Keir Starmer, who described the deal as “a generational step change in our relationship with the US”. 

The roadblock to progressing the agreement was first reported by the New York Times, which claimed the breakdown in trade talks between the two countries stemmed from disagreements around a digital services tax on American tech companies and the UK’s food safety rules, which bar the import of certain agricultural products like chlorinated chicken from the US.

Related content

• Tech giants paying ‘significantly more tax’ following HMRC digital services levy
• ‘No longer a welcoming environment’ – web giants criticise government’s digital services tax plan
• Trump and Johnson discuss Huawei as sources warn situation could imperil trade deal

The US has reportedly pressured the UK government to scrap or amend the digital services tax, a 2% levy applicable to all revenues in excess of £25m a year derived from UK users of social networks, online marketplaces, and search engines. The measure has affected US giants including Amazon, Google and Apple. The tax raises around £800m a year for the UK economy, but president Trump has repeatedly threatened to retaliate against countries with digital taxes on US companies.

As part of the deal, US tech companies had pledged to spend billions in the UK, including a £22bn investment from Microsoft.

Announcing the deal, Starmer said: “It’s our chance to ensure that technologies like AI, quantum and others amplify human potential, solve problems, cure diseases, make us richer and freer, strengthen democracy not tyranny.”

But, responding to the trade deal when it was announced, Nick Clegg – the former UK deputy prime minister and more recently president for global affairs at Facebook-owner Meta – raised concerns that the UK could turn into a “vassal state” for tech companies based in the US, leaving the UK wholly dependent on US tech firms for investment and innovation.

A version of this story originally appeared on PublicTechnology sister publication Holyrood