Rachel Reeves is reviewing the UK’s £700m digital services tax (DST) on American tech giants in a bid to avoid Donald Trump’s tariffs.

The DST, which was introduced in April 2020, imposed a two per cent levy on UK revenues of major tech leaders like Amazon, Apple and Google.

The US previously expressed strong opposition, viewing them as unfairly targeting American businesses, and Trump’s recent tariff imposition has reignited the issue.

In the last year, it generated approximately £678m for Britain.

Reeves’ move comes as president Donald Trump recently imposed tariffs of 25 per cent on Canada and Mexico. These two however have had a reprieve.

Trump also imposed a 10 per cent levy on China, which has already responded by hitting American products as retaliation.

Leaders of Mexico and Canada made agreements to pause Trump’s 25 per cent tariffs for 30 days, temporarily averting a trade war.

Britain walks a tightrope

While the UK has not been directly targeted, the Chancellor is preempting pressure from the newly re-elected president, who recently said that the UK is ‘out of line in trade’.

He suggested that a compromise “can be worked out” to avoid potential tariffs, as Rachel Reeves and Keir Starmer face their own domestic problems.

Fresh polling today, revealed exclusively by City AM, showed the majority of Brits now have little confidence in Reeves’ plan to generate economic growth despite a renewed push from the Chancellor to kickstart Britain’s ailing economy.

Meanwhile, in an open letter Sacha Lord, who was until recently Andy Burnham’s night time economy adviser for Greater Manchester, said he no longer considers Labour to be the party of “business and growth”.

As these problems pile up, Rachel Reeves and Keir Starmer are declining to directly criticise Donald Trump, and looking to ensure the UK isn’t in line for a tariff.

John Denton, from the international chamber of commerce, said: “I think there will be a a lot of pressure put on the UK on this particular issue’ from the US, regarding the DST.