Davey warns against scrapping tax on tech companies to ‘appease’ Trump

Sir Ed Davey has warned against “appeasement” of Donald Trump amid reports Labour could change or ditch a tax on tech companies to avoid US tariffs.

Chancellor Rachel Reeves did not deny the option was on the table after reports the UK is talking to the US about the digital services tax to seek a carve-out from reciprocal tariffs the US President has said he will impose on most of the country’s trading partners from April 2.

Lib Dem leader Sir Ed said Labour’s strategy for Mr Trump was “let’s be nice to him and hope he won’t hurt us”.

Sir Ed told his party’s spring conference in Harrogate: “Now Labour’s even talking about scrapping Britain’s tax on social media giants. Changing the UK’s tax policy to appease Donald Trump and Elon Musk.

“Well, appeasement never works with bullies, and it doesn’t work with Trump.

“And you can see that he’s already put his tariffs on British steel.”

Business Secretary Jonathan Reynolds has been talking to trade counterparts in Washington this week.

Meanwhile, Technology Secretary Peter Kyle has been in the US to tout the UK as a hub for AI investment and spoke at Nvidia’s annual conference.

Ms Reeves told the BBC’s Sunday with Laura Kuenssberg that the UK is in discussions “around a whole range of things” with the US related to tariffs when asked about the reports.

She said: “We will continue to operate on that principle that you should pay taxes in the country in which you operate.”

Asked if she might tweak the digital services tax in order to save the UK economy from Mr Trump’s tariffs, she said: “You’ve got to get the balance right and those discussions at the moment are ongoing.

“We want to make progress. We do not want to see British exporters subject to higher tariffs and we want to see trade barriers fall right across the world.”

Ambassador to the US Lord Mandelson told the Financial Times that the “tax itself is under discussion” and signalled a variety of options were on the table beyond scrapping it completely.

The newspaper also cited people briefed on the discussions who said the UK Treasury was examining options that depend on whether Washington gives a clear offer to exempt Britain from tariffs.

Sir Ed also called for tariffs on Tesla vehicles if Mr Trump ignites a “trade war” and urged Sir Keir Starmer to co-ordinate a response with the EU and Canada.

The Lib Dem leader said: “Let’s stand side by side with the EU and with our Commonwealth ally Canada.

“I urge the Prime Minister to bring those leaders together here in the United Kingdom to agree a co-ordinated response to Trump’s trade war – just like the Prime Minister’s rightly done on Putin’s murderous war.

“As others have done, we should hit back with tariffs of our own, starting with those Teslas Trump is so desperate to sell.”