The UK’s business and trade secretary, Jonnie Reynolds, is in Washington today (18 March) to negotiate for a UK exemption from Donald Trump’s ‘reciprocal’ tariffs that are due in early April.
He is due to meet Howard Lutnick, the new US commerce secretary, and Jamieson Greer, the US trade representative.
Talks for a new UK-US economic agreement are taking place, with Reynolds’ team hopeful that the UK’s broadly balanced trading relationship will enable it to escape tariffs.
“Today’s visit to Washington DC is the latest step in our pragmatic and positive engagement with the new administration to agree a wider economic deal in both our interests,” Reynolds has said.
Digital services challenge
However, a digital services tax currently levied by Britain is thought to be a potential stumbling block.
The tax, introduced in April 2020, is a 2% levy on revenues of search engines, social media platforms and online marketplaces that have users in the UK.
President Trump has argued that it is largely aimed at US tech giants. He last month ordered Greer to reopen investigations looking into the levy.
“My administration will not allow American companies and workers and American economic and national security interests to be compromised by one-sided, anti-competitive policies and practices of foreign governments,” he wrote in a memo.
“What they’re doing to us in other countries is terrible with digital,” Trump also said at the time.
Long-term tech partnership
A British official told the FT today that “there’s no suggestion of us making any changes to the digital services tax”.
Instead, the UK is pursuing a “longer-term tech partnership” built on cooperation on areas such as AI. Another official said:
“The way is paved for a quick agreement on tariffs and a longer term tech partnership. The US side is demanding but they also want to demonstrate that allies can negotiate with them, that deals are possible.”
Oracle of hope
The ambitions for a tech deal may be supported by yesterday’s pledge from US tech giant Oracle to invest £3.9bn in AI infrastructure in the UK.
Larry Ellison, the founder of the cloud computing firm and a key Trump backer, said the investment will help the firm “meet the rapidly growing demand for its cloud services in the UK,” the Telegraph reports.
Ellison is also a close ally of Elon Musk, having previously sat on Tesla’s board and having invested in his takeover of Twitter, now known as X.
‘Pragmatic’ approach
The UK government has said that it is taking a “pragmatic” approach to the Trump administration’s enthusiasm for tariffs and has not yet followed the EU in retaliating to hiked US duties on steel and aluminum imports.
Reynolds has said that he hopes the government’s “cool-headed response” could curry some favour for the UK with Trump’s team.
UK-US trade stats
Imports and exports between the UK and US were valued at US$317bn in 2023, according the US Bureau of Economic Analysis.
Reuters reports that the UK is the US’ fifth largest trade partner after Canada, Mexico, China and Germany. The US is the UK’s single largest nation state partner, though trade with the EU as a bloc is far greater.
