The vision of a sweeping U.S.–U.K. technology partnership has now stalled after President Donald Trump formally paused the high-profile tech agreement amid growing concerns that the United Kingdom’s new Online Safety Act gives British regulators unprecedented power to police the speech of American companies and AI systems.
The suspension marks a significant setback for what had been promoted as a landmark economic and research partnership between Silicon Valley and London.
According to negotiators, the turning point came as U.S. officials concluded that Britain intended to apply its speech-restriction regime to American platforms and AI models operating outside the U.K.
One participant in the talks summarized Washington’s frustration bluntly, telling The Telegraph:
“Americans went into this deal thinking Britain was going to back off regulating American tech firms, but realized it was going to restrict the speech of American chatbots.”
At the center of the dispute is the U.K.’s Online Safety Act, a law empowering the British communications regulator Ofcom to fine companies it judges to be enabling “harmful” or “hateful” speech.
U.S. officials say the definitions are broad enough to sweep in a wide range of content, raising concerns that American AI systems could face liability in British courts.
Ofcom has already issued enforcement notices to major U.S. firms, despite the companies having no physical presence in the United Kingdom.
The White House had initially embraced the proposed $41 billion Tech Prosperity Deal as a way to deepen cooperation on AI, digital trade, and data infrastructure.
But U.S. officials grew increasingly skeptical after Britain moved toward direct regulation of AI chatbot outputs.
The breaking point came earlier this month, when U.K. Technology Secretary Liz Kendall announced that the government would “impose new restrictions on chatbots” to close what it described as regulatory loopholes.
Following the announcement, U.S. officials concluded that the law was expanding into an attempt to govern the speech of AI products themselves.
As one U.S. source told the British outlet:
“The perception is that Britain is way out there on attempting to police what is said online.”
The dispute has been compounded by Britain’s Digital Services Tax, a 2 percent levy applied to major U.S. tech companies.
The tax was introduced as a temporary measure but has effectively become permanent, prompting sharp criticism from Trump.
Trump has said countries that impose such policies are treating American companies like a “piggy bank.”
Administration officials have signaled that retaliatory tariffs remain on the table.
Together, the speech-regulation concerns and the tax dispute have frozen progress on the broader Economic Prosperity Deal announced in May 2025.
U.S. negotiators say the U.K. has failed to reduce trade barriers or modernize its regulatory approach for digital markets.
Washington’s concerns come as the European Union pursues its own aggressive enforcement actions, including a €120 million fine against X under its Digital Services Act.
U.S. officials have increasingly viewed the EU’s and the U.K.’s regulatory frameworks as part of a unified trend toward government-directed content moderation.
American policymakers remain aligned with the First Amendment principle that governments should not determine permissible speech, whether from individuals or AI systems.
Downing Street, however, maintains that discussions with Washington are ongoing.
A spokesperson said the U.K. remains “confident of securing a deal that will shape the future of millions on both sides of the Atlantic.”
For now, the agreement remains on hold, a casualty of an increasingly sharp transatlantic divide over who governs online expression and how far governments should go in regulating AI.
READ MORE – UK Government Launches New Effort to Crack Down on Public’s ‘Emotions’
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