Last reviewed 30 March 2021

For several years the Government has held up the possibility of a trade deal with the United States as a counterbalance to the reduction in trade with Europe caused by Brexit.

Hopes were raised a few weeks ago as International Trade Secretary Liz Truss welcomed the US decision to suspend tariffs on a range of goods that had been imposed because of the long-running Boeing-Airbus dispute.

However, new problems seem to have appeared following a series of rather technical sounding “Section 301 investigations” by the United States Trade Representative (USTR).

The United States government has reacted to warnings from a number of countries that digital companies (such as Facebook) do not pay enough tax in the countries where they operate.

Now it has told 10 of its trading partners, including the UK, Spain and Italy, that it will respond if they go ahead with proposed Digital Service Taxes (DSTs) which, the USTR said, discriminate against US digital companies and are inconsistent with principles of international taxation.

“Proposed action in Section 301 Investigation of the United Kingdom’s Digital Services Tax” has been published as a consultation document and can be found at https://ustr.gov/sites/default/files/files/Press/Releases/FRNUK.pdf.

It states: “The United Kingdom has adopted a DST that applies a 2% tax on the revenues of certain search engines, social media platforms and online marketplaces.”

The notice lists numerous products that could be subject to retaliatory tariffs if the UK does not withdraw its DST.

Given with their eight-digit subheadings of the Harmonised Tariff Schedule of the United States (HTSUS), these products include shampoos, cosmetics, bath salts, clothing such as anoraks and dresses, glazed ceramic tiles, gold necklaces and neck chains and “traveling circuses and traveling menageries; parts and accessories thereof”.

The proposed tariffs of up to 25% would be intended to raise some $325 million, the amount that the USTR calculates the UK tax would cost American companies.

Responses to the USTR consultation will be considered in May 2021 when a decision on whether to impose the tariffs is expected.