The UK government is planning to reduce its digital services tax (DST) while expanding its application to smaller companies, a move aimed at addressing fairness concerns raised by the US.

As part of ongoing negotiations with the US amid rising trade tensions, the UK Prime Minister is considering lowering the DST.

The Office for Budget Responsibility has warned that a prolonged trade war could jeopardize the UK's economic projections, especially if tariffs remain high.

In a bold move, Trump plans to implement tariffs of up to 20% on all imports to the US, which he has dubbed 'liberation day.'

Despite the looming tariffs, Starmer has acknowledged that a trade agreement is unlikely to be finalized before they take effect, although the UK is seeking exemptions.

Education Secretary Bridget Phillipson has stressed the importance of a calm and pragmatic government response to the trade situation, keeping all options on the table.

Chancellor Rachel Reeves has expressed concerns that these tariffs could harm the UK economy and has discussed the situation with her US counterpart.

In addition to tax changes, the UK government may also alter tariffs on American meat exports, which could further aggravate tensions with UK farmers.

A recent study indicated that a trade war triggered by Trump's tariffs could cost the global economy £1.1 trillion, with the UK automotive sector at risk of losing 25,000 jobs.

Trump has expressed dissatisfaction with DSTs affecting US firms and has threatened retaliatory tariffs, as outlined in his February executive order.

Starmer has proposed significant tax cuts for major US tech firms in exchange for lower tariffs from Trump's administration, as the UK braces for potential trade conflicts.

Currently, the DST generates £800 million annually, and the government anticipates this figure could rise to £1.2 billion by the end of the decade with the expanded scope.