Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
Britain is racing to avoid the worst of US President Donald Trump’s global tariffs, due on April 2, after “productive” talks on Tuesday that included discussions about the UK’s digital services tax.
UK business secretary Jonathan Reynolds has told his officials to carry on talking with Trump’s trade team over the next 48 hours in the hope of securing a deal that would spare the UK the highest level of US reciprocal tariffs.
The discussions include the UK’s levy on companies such as Alphabet and Facebook, a key complaint of US negotiators, according to British officials, despite the UK Treasury insisting it has no plans to drop the £800mn a year tax.
Allies of UK chancellor Rachel Reeves admit that a global trade war could “blow all our plans off course”.
Trump has vowed to impose “reciprocal” tariffs on the US’s trading partners on April 2. But he is targeting not only countries that impose tariffs on the US but also those that use other policies the US president dislikes, such as internal sales taxes.
British officials briefed on the talks said they accepted that the UK would inevitably be hit with Trump’s promised tariffs next month but that Reynolds’ aim was to see them applied at a reduced rate.
“We are working at rapid speed,” said one UK official. “There will be some friends of the US who will be in the tent and others who will be outside. Our aim is to be in the tent.”
British officials said there were “potential heads of agreement” on a broad trade deal between the UK and US, focused on technology, which could alleviate punitive tariffs on Britain, but they conceded the American negotiation position was “demanding”.
A key US demand is that Britain drops its digital services tax, a levy introduced in 2020 which falls heavily on American tech companies, but which is forecast to raise £800mn for a cash-strapped Treasury in 2024-25. Other countries in Europe have similar taxes, as has Canada.
Reynolds discussed the demands during a two-hour meeting in Washington on Tuesday with US commerce secretary Howard Lutnick, US trade representative Jamieson Greer and US special envoy Mark Burnett.
Officials called Reynolds’ talks “productive” and focused on the fact that Britain and the US have a broadly balanced trade relationship.
The UK Treasury said it was not planning to change the digital services tax, a 2 per cent levy on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. But British officials said it was under discussion.
US Treasury secretary Scott Bessent told Fox Business Network this week that the Trump administration would apply different tariffs to different trading partners. “On April 2, each country will receive a number that we believe represents their tariffs,” Bessent said. “For some countries it could be quite low, for some countries it could be quite high.”
Trump is especially targeting the EU and any special deal for the UK could lead to trade tensions between London and Brussels.
Lord Peter Mandelson, a strong pro-European, has said that Brexit does offer Britain a chance to have a better relationship with the US than its European neighbours.
UK Prime Minister Sir Keir Starmer and Trump agreed last month that their teams should start working together on “an economic prosperity deal”.
The UK Department of Business and Trade said: “The UK looks forward to developing this deal over the coming weeks and months.”
