Sir Keir Starmer is pulling out all the stops to shield Britain from Donald Trump’s looming trade tariffs, reportedly offering major US tech firms a tax break in a last-ditch effort to secure a deal. With the UK economy at risk, the prime minister is weighing significant changes to the government’s digital services tax (DST) to keep American imports flowing without punitive levies.
High Stakes as Trump’s ‘Liberation Day’ Tariffs Loom
The urgency is palpable. Trump’s administration is preparing to slap tariffs of up to 20% on all imports, branding the move as “liberation day” for the US economy. The UK had hoped to reach an agreement before the deadline, but with time running out, Starmer’s government is shifting its focus to damage control.
Business Secretary Jonathan Reynolds has suggested Britain could be the first to secure an exemption from the tariffs, but negotiations remain tense. According to reports, a deal covering artificial intelligence and other key technologies is close. However, the UK’s offer to revise its DST policy has raised eyebrows.
A Sweet Deal for US Tech, but at What Cost?
The proposed DST adjustment would lower tax rates for US tech giants like Amazon, Meta, and Google while keeping revenue levels steady by applying higher rates to non-US companies. This strategic shift aims to win favor with Washington, but it risks inflaming tensions with Britain’s trade partners.
- The DST currently generates £800 million annually for the UK government.
- A tax cut for US firms could ease transatlantic trade tensions but may spark disputes with European and Asian markets.
- Critics argue that the move favors multinational corporations at the expense of fair tax practices.
Britain’s willingness to adjust its tax policies to appease Trump’s administration highlights the high stakes involved. With the global economy bracing for the ripple effects of US protectionism, Starmer’s government is playing a delicate balancing act.
Trade War Fallout: UK Manufacturing and Farming at Risk
Chancellor Rachel Reeves has warned the Cabinet that Trump’s tariffs could deal a serious blow to the UK economy. A recent study estimated a global trade war could cost £1.1 trillion, and the impact on British industries could be severe.
The automotive sector is particularly vulnerable, with the Institute of Public Policy Research (IPPR) warning that 25,000 UK jobs could be at risk if Trump imposes 25% tariffs on all car imports. Meanwhile, proposed adjustments to UK tariffs on American chicken, beef, and other meats have sparked backlash from British farmers already feeling the pressure of policy changes.
Political Backlash and Public Reaction
The Liberal Democrats are not holding back in their criticism. Treasury spokesperson Daisy Cooper slammed the proposed tax break, calling it an insult to struggling citizens facing government spending cuts. “Rewarding a bully means he will only come back for more,” she warned, urging the UK to stand firm against Trump’s aggressive trade stance.
Education Secretary Bridget Phillipson, however, has emphasized a more measured approach. Speaking to Times Radio, she insisted that Britain is in a “strong position” and that the government remains committed to a pragmatic negotiation strategy. “A trade war would be in no one’s interest,” she said, stressing that all options remain on the table.
What Happens Next?
Trump is expected to officially unveil his tariff plan in a high-profile Rose Garden event titled “Make America Wealthy Again.” As the clock ticks down, UK officials will be watching closely to see if their last-minute maneuvers have paid off.
Downing Street remains tight-lipped on final negotiations, but one thing is clear: Starmer’s administration is willing to make bold moves to protect Britain’s economy from the fallout of Trump’s trade war. Whether those moves will pay off—or backfire—remains to be seen.
