Prime Minister Keir Starmer is holding fresh trade talks with US amid last-ditch bid to avoid tariffs on UK exports

Keir Starmer has held fresh talks with Donald Trump on a US trade deal amid mounting speculation Britain could scrap a tax on American tech firms in a bid to avoid tariffs on UK exports.

Downing Street yesterday revealed that the Prime Minister spoke with the US President by phone on Sunday night to ‘discuss progress’ on a possible deal.

Ministers are scrambling to secure an exemption from swingeing American tariffs which are due to come into force on April 2.

Whitehall sources have confirmed that dropping the £800million Digital Services Tax, which is levied mainly on US tech firms, has formed part of the discussions.

At the weekend, Chancellor Rachel Reeves refused to rule out ditching the 2 per cent levy on the UK revenues of social media, search engines and online shopping platforms like Google, Amazon and Meta.

But yesterday she indicated she will resist the move, describing the tax as ‘hugely important’. 

The Chancellor added: ‘We will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector.’

The levy was introduced in 2020 to help ensure tech firms pay more tax and counter criticism that they enjoy an unfair tax advantage compared with high street retailers. But revenues have fallen far short of the estimated £3billion a year.

Downing Street revealed that the Prime Minister spoke with the US President by phone on Sunday night to ‘discuss progress’ on a possible deal

At the weekend, Chancellor Rachel Reeves refused to rule out ditching the 2 per cent levy on the UK revenues of social media, search engines and online shopping platforms

The 2 per cent levy would impact companies such as Google, Jeff Bezoss Amazon and Meta

President Trump floated the idea of a new ‘trade deal’ when Sir Keir visited the White House this month.

Ministers have played down the prospect of a free trade agreement. But they believe a limited agreement on technology and artificial intelligence could boost the economy and help avert the tariffs – which could be 20 per cent or more – due to be imposed next week.

Asked whether Digital Services Tax would be scrapped as part of the deal, the PM’s spokesman told reporters yesterday: ‘The UK will only do a deal in the national interest, which reflects this Government’s mandate to deliver economic stability for British people.’

The National Institute of Economic and Social Research has estimated that tariffs on this scale could wipe 0.4 per cent off economic growth over the next two years, costing the UK economy around £24billion.