The Government’s digital services tax is due to become law later this year. It would significantly affect major American tech companies like Google, Facebook and Amazon. The Daily Telegraph claims the Trump administration will demand the tax is ditched before talks on a new trade deal begin.

Speaking to the paper a source said: “The message was, ‘If you go ahead and introduce this tax, we will not begin free trade negations with you’.”

Former Chancellor Philip Hammond introduced the new tax in his autumn 2018 budget and it is due to tae effect in April 2020.

The tax places a 2 percent tariff on revenue generated in the UK from search engine and social media firms, which are predominantly US based.

It had been estimated the tax would raise £400million by the year 2022.

Speaking to The Daily Telegraph sources linked to Chancellor Sajid Javid described the move as a “tax grab” aimed at benefitting US companies.

Senior Democrats have also insisted the UK drops the planned new tax.

Ron Wyden, who sits on the powerful Senate finance committee, told former Trade Secretary Liam Fox “there should not be any negotiations on a trade deal as long as a digital services tax is being pursued by Britain”.

The Democrats, who have a majority in the House of Representatives, could significantly delay any trade deal.

Some in Congress have said this will happen if the British Government does anything to undermine the Good Friday peace agreement in Northern Ireland.

Donald Trump welcomed Boris Johnson’s accession to the position of Prime Minister and has vowed to negotiate a major free trade deal after Brexit.

Earlier this week the President commented: “We’re working already on a trade agreement.

“I think it’ll be a very substantial trade agreement.

“I think we can do three to four or five times what we’re doing.”

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