A MINISTER has refused to rule out giving tech giants a tax break in a bid to exempt Britain from US tariffs – after Donald Trump announced new 25% rates on imported cars.
Trade Secretary Jonathan Reynolds indicated that the Government was willing to discuss reducing the burden of the digital services tax on US firms like Amazon and Meta, the parent company of Facebook, at Chatham House conference on Thursday.
He said: “We have always been of the view as a country that this has to be something ideally agreed on an international basis, but it’s not that [digital services tax] has been put in place as something that can never change or we can never have a conversation about it.”
Insisting that the Government was “committed to making sure tech companies pay a fair amount of tax in the UK”, Reynolds (below) added that the US had expressed “concerns about the specific structure of that”, but said it was not “a major part of the conversation” on tariffs.
Introduced as a temporary measure in 2020, the tax imposes a 2% levy on tech firms, including US giants owned by supporters of Donald Trump, and brings in about £800 million a year.
Elsewhere, Chancellor Rachel Reeves said the UK was not planning “at the moment” to introduce retaliatory tariffs on the US in response to Trump’s new policy on imported cars – which has sent shockwaves through the markets.
Shares in UK carmaker Aston Martin dropped by 6% when stock markets opened on Thursday morning.
Reeves told Sky News: “We’re not at the moment at a position where we want to do anything to escalate these trade wars.”
The new tariffs are to come into force on April 2, along with other new levies on imported goods.
Official forecasts from the Office for Budget Responsibility (OBR) estimate that tariffs could knock off as much as 1% of gross domestic product from the UK’s flatlining economy, if the Government fails to secure exemptions.
America could also introduce a general 20% levy on all UK-made goods in response to the rate of VAT.
The LibDems are calling on the Government to back the digital services tax, saying it would be “unforgiveable if the Government goes ahead with cutting taxes for US tech barons to appease [Elon] Musk and Trump”.
The party are also calling for the UK Government to introduce retaliatory tariffs on America and specifically Tesla, which is owned by Musk, who holds a powerful role in Trump’s White House.
The “worst-case scenario” would come about if Trump imposed 20% tariffs on British goods and the UK reciprocated in kind, the OBR warned on Thursday.
Richard Hughes, the spending watchdog’s chairman, said: “This represents the crystallisation of one of the risks that we highlighted around our central forecast, which was one of escalating global trade tensions.”
Around four in five cars made in the UK are exported to America, a trade which represents around 0.2% of British GDP, according to Hughes.
UK vehicle exports to the US are mainly premium and luxury cars.
Some 16.9% of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.
