Author: Park Mie

In a significant move aimed at navigating the increasingly tense global trade landscape, UK Labour leader Keir Starmer has offered major US technology companies a substantial reduction in the country’s Digital Services Tax (DST). In return, Starmer seeks concessions from Donald Trump’s administration, including lower tariffs on UK exports. This proposal comes as the UK braces itself for a potential global trade war that could have serious economic ramifications.

A Tactical Offer to the US Tech Giants

According to sources familiar with the negotiations, the UK government is willing to lower the headline rate of its 2% DST, which currently targets the UK revenues of major tech firms like Amazon, Meta, Alphabet, eBay, and Apple. The reduction is seen as a strategic move to placate the Trump administration, which has repeatedly criticized DSTs around the world, accusing them of unfairly targeting US-based companies.

The UK’s offer goes further than just appeasing the Americans; it includes expanding the scope of the DST to include smaller tech companies from other countries. This would result in a broader tax base, with the UK government estimating that the DST could raise up to £1.2 billion annually by the end of the decade—up from the current £800 million.

In essence, the proposal aims to ensure fairness in the tax system, addressing US complaints while also ensuring that the UK government’s revenue targets from tech companies remain intact. Tech firms generating more than £500 million in global revenue and over £25 million from UK users are liable for the tax, which has garnered criticism for disproportionately impacting larger firms, many of which have lobbied for reductions.

A Bargain With Trump: Trade Concessions in Exchange for Tax Cuts

The move to offer US tech firms a tax cut is part of a broader trade deal with the United States, with the UK hoping to secure exemptions from the tariffs President Trump has indicated he will impose on imports. In particular, the US is planning a 25% tariff on all car imports, which could have devastating consequences for the UK’s automotive sector. The Institute for Public Policy Research (IPPR) warns that such tariffs could threaten up to 25,000 jobs in the UK’s car manufacturing industry, as one in eight cars built in the UK is sold to the US market.

In addition to discussions about the DST, the UK is also reportedly negotiating on agriculture, with the government considering lowering tariffs on imports of US beef, chicken, and other meats. While this is seen as a way to strengthen the trade relationship with the US, it is likely to face strong opposition from UK farmers, who are already upset by changes to inheritance tax rules affecting agriculture.

The Road Ahead: Trade War Looms

As the UK government grapples with the prospect of escalating trade tensions, Downing Street remains hopeful that a comprehensive trade agreement with the US can be reached, offering a lifeline in the face of Trump’s global tariff threats. The government has said that it is “keeping all options on the table” in terms of retaliation but has not yet made public any plans to impose counter-tariffs.

Experts are watching closely as the White House prepares to announce the next steps in its trade policy, with Trump’s administration expected to impose tariffs on goods from several major economies. While the UK remains optimistic that a trade deal could secure exemptions from these tariffs, the initial phase could see significant disruptions, particularly for industries reliant on exports to the US.

Conclusion: Navigating a Complex Trade Landscape

Starmer’s offer to lower the DST in exchange for trade concessions represents a delicate balancing act for the UK government, which is trying to protect its domestic industries while maintaining a favourable relationship with the US. However, the success of these negotiations will depend on the broader context of the evolving global trade war, which could see the UK caught between competing economic pressures.

The coming weeks will likely reveal whether this strategy can secure the UK the trade exemptions it needs to safeguard jobs and economic stability, or whether it will find itself ensnared in a broader conflict that threatens its financial plans. Either way, the UK’s relationship with the US, and the future of global trade, are poised to take centre stage in the coming months.

In the wake of President Donald Trump’s latest tariff announcement on April 2, 2025, the global stock market saw a significant downturn, with technology stocks taking a particular hit. The tariffs, which will take effect on April 9, raise import duties on Chinese goods to a staggering 54%, a move set to impact U.S. companies with substantial international manufacturing footprints. However, while American tech stocks faced major sell-offs, Cathie Wood, the CEO of Ark Invest, has made a bold move, betting $12 million on China’s burgeoning artificial intelligence (AI) sector.

Tech Giants React to Trump’s Tariffs

Trump’s tariff announcement triggered a sharp sell-off in U.S. tech stocks, particularly those with global manufacturing and supply chain operations. Tesla, which has a significant presence in China, saw its shares drop by more than 8% in after-hours trading. Other tech titans like Amazon, Apple, and Nvidia also suffered notable declines, falling by over 6% each. Even the likes of Google, Microsoft, and Meta couldn’t escape the market sell-off, each witnessing losses as investors reacted to the uncertain economic climate created by the tariffs.

However, the real shock came in Asian markets, where Chinese stocks bore the brunt of the tariff impact. As markets in China opened on Thursday, major Chinese tech stocks such as Alibaba, Baidu, and Tencent also experienced declines. Still, these companies fared better than their U.S. counterparts, with drops of less than 3% compared to the more significant losses seen among American tech giants. This resilience in Chinese Big Tech stocks suggests that investors had already priced in potential tariff disruptions, mitigating some of the damage caused by the latest round of tariffs.

Chinese Big Tech’s Comparative Resilience

The relative strength of Chinese tech stocks amid the tariff storm is notable, especially as U.S. technology firms with global manufacturing operations felt the weight of the tariff announcement. While Alibaba, Baidu, and Tencent did see their market values dip, these declines were not as severe as those suffered by their American rivals.

One factor contributing to this resilience is the ongoing shift toward AI and other tech-driven sectors in China. The growing optimism around China’s AI market, driven by technological advances and the success of emerging AI models, has provided a buffer against the economic challenges posed by the tariffs. Chinese tech giants, despite facing export challenges, have been capitalizing on AI-driven opportunities that do not rely heavily on international trade or physical exports.

China’s AI Opportunity

Despite the overall market downturn, Chinese Big Tech has shown remarkable year-to-date performance in 2025, with Alibaba, Baidu, and Tencent reporting gains ranging from 9% to 55%. This bullishness surrounding AI, coupled with China’s rapid advancements in the field, has given investors confidence that these companies can thrive without being overly dependent on traditional export channels.

In stark contrast, U.S. tech stocks, particularly the “Magnificent Seven” (Tesla, Amazon, Apple, Microsoft, Google, Nvidia, and Meta), have all experienced declines since the start of 2025. The performance gap between Chinese and American tech firms underscores a growing divergence in the market as global investors turn their attention to AI as a potential driver of growth.

Cathie Wood’s $12 Million Bet on Baidu

While Ark Invest’s Exchange Traded Funds (ETFs) have faced a difficult start to the year, with losses ranging between 8% and 15% due to underperformance in its key holdings such as Tesla and Coinbase, CEO Cathie Wood has decided to pivot toward Chinese Big Tech. At the end of March 2025, Ark Invest’s ARK Next Generation Internet ETF (ARKW) and ARK Autonomous Technology & Robotics ETF (ARKQ) purchased over 120,000 shares of Baidu, valued at approximately $12 million.

This move marks a significant shift for Ark Invest, which had previously divested from Chinese tech companies like Baidu and Tencent between 2021 and 2022. Wood’s renewed interest in Chinese tech, particularly in the AI space, signals a belief in the long-term potential of these companies despite the ongoing challenges posed by U.S. trade barriers. By diversifying into China’s AI sector, Ark Invest aims to capitalize on the country’s tech-driven future while navigating the turbulent waters of U.S.-China trade relations.

Conclusion: Betting on the Future

Despite the challenges presented by Trump’s latest tariffs, Cathie Wood’s strategic bet on Baidu reflects a larger shift in the global tech landscape. While U.S. tech giants continue to feel the pain of trade disruptions and global supply chain issues, Chinese Big Tech, with its heavy focus on AI innovation, is positioned to weather the storm. Ark Invest’s $12 million investment in Baidu is just one example of how investors are seeking opportunities beyond the immediate fallout of tariffs, looking instead to capitalize on the promise of China’s AI surge.

As the tech world braces for the impact of the new tariffs, the divergent paths of U.S. and Chinese tech companies will be closely watched, with many betting on AI as the next frontier of growth. Whether Cathie Wood’s faith in China’s tech sector pays off remains to be seen, but for now, the market is watching closely as both U.S. and Chinese tech giants navigate a new, tariff-ridden world.