Britain believes it can reach a deal to remove President Trump’s remaining tariffs within months and is willing to use its £800 million levy on technology giants as a “bargaining chip”.
Trump’s trade adviser likened Britain’s digital services tax to a “bad virus” as Sir Keir Starmer suggested he could put it on the table in future talks.
Both the US and the UK hailed a “historic” agreement, which will cut tariffs on British cars from 27.5 per cent to 10 per cent and levies on steel from 25 per cent to zero. In return Britain will cut tariffs on US agricultural exports including beef and corn ethanol.
The vast majority of British exports will still be subject to the baseline 10 per cent tariff imposed by Trump in April. However, The Times understands that the US offered to cut tariffs below this level during negotiations.
Starmer prioritised securing a quicker deal to safeguard the car and steel industries, which were within days of announcing plant closures and job cuts. Ministers said that the deal protected 150,000 jobs. Lord Mandelson, Britain’s ambassador to the US, said the deal had “saved” 30,000 jobs at risk at Jaguar Land Rover.
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Talks will continue on a deeper “economic prosperity deal”, which a five-page heads-of-terms document said would aim to make “bilateral trade fairer, easier, and more substantial”.
British negotiators hope a more substantial deal can be reached in the coming months to cut tariffs further, but the US is likely to ask for concessions on NHS medicine prices as well as the 2 per cent tax on the UK revenues of search engines, social media services and online marketplaces, most of which are based in the US.
Peter Navarro, Trump’s trade adviser, said such taxes had “spread like a bad virus around the world, but it started in Europe, and it basically targets American companies”. He told Politico that the US was “still in negotiations” about outstanding issues.
Peter Navarro advises President Trump on trade
ALEX BRANDON/AP
The Office of the US Trade Representative, Jamieson Greer, said in a statement: “The United States is disappointed that the UK was unwilling to agree to fully address its discriminatory digital services tax. It is discriminatory, unjustified, and should be removed promptly.”
Starmer did not rule out changes to the tax as part of future negotiations. “On digital services, there are ongoing discussions, obviously, on other aspects of the deal,” he said. “The deal that we signed [on Thursday] doesn’t cover that.”
Speaking during a visit to Norway, he stressed that the deal was “predominantly focused on steel and aluminium and reducing those tariffs on car manufacturing and reducing the tariffs there, and then future-proofing for pharmaceuticals, three really important sectors, and that will be measured in thousands and thousands of jobs that will be protected”.
Downing Street said that the tax could be part of “ongoing discussions”, describing Thursday’s deal as “the beginning of the process”. A spokesman said: “We’re continuing talks on that wider economic deal, which will look at increasing digital trade, which is a tremendous opportunity.”
Officials confirmed that the tax was likely to be part of the next phase of negotiations, suggesting it could be used as a “bargaining chip” to remove remaining tariffs on British goods.
Sir Keir Starmer spoke at a security conference in Norway on Friday
TERJE PEDERSEN/EPA
Jake Colvin, president of the National Foreign Trade Council, a US industry body, suggested that American companies would welcome cuts to tariffs on British goods and UK concessions on tax. “It would be extremely disappointing if the UK doesn’t use this opportunity to address key trade irritants such as its digital services tax, which is a discriminatory policy that disproportionately targets US companies,” he said.
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The governor of the Bank of England urged Starmer to “rebuild” trade relations with the European Union. “It is important we do everything we can to ensure that whatever decisions are taken on the Brexit front do not damage the long-term trade position,” Andrew Bailey told the BBC. He said the agreement “demonstrates that trade deals are important”, adding: “I hope that we can use these deals to rebuild the world trading system.”
Darren Jones, chief secretary to the Treasury, rejected criticism that the US deal left Britain worse off than it had been before Trump’s tariffs. “The counterfactual is the world that we live in, not the world that we would like it to be. In relation to the world that we live in, this is a really good deal for Britain,” he told Times Radio. “We are the first country in the world to be able to negotiate an agreement with the president of the United States to move away from those increased tariffs on global trade.”