U.S.-UK Trade and Tech Agreement(s): An Update After the State Visit

Commentary by Meredith Broadbent and Ophelia Bentley

Published October 9, 2025

The pageantry surrounding President Donald Trump's recent state visit to the United Kingdom, along with the health of the bilateral relationship on display despite diverging political views between Prime Minister Keir Starmer and President Trump, signals an opportunity for the United States to push forward on a sustainable and comprehensive deal governing digital trade. Importantly, this would include removal of the UK digital services tax (DST)-a long-held goal of Congress and the U.S. private sector that remains unaccomplished and should take center stage in the U.S. trade agenda going forward.

Current State of U.S.-UK Trade Relations

Let's review where the two allies stand after the state visit. Although the U.S.-UK Economic Prosperity Deal (EPD), concluded on May 8, 2025, references future discussions toward a "transformative technology partnership," a comprehensive framework for digital trade and technology cooperation is still lacking.

Billed by Prime Minister Starmer at the time as the "just the start" of a "wider economic deal," the EPD stands as a tariff agreement comprising 10 percent baseline tariffs on UK exports to the United States and various targeted tariff liberalizations for specific sectors of U.S. exports, including ethanol and beef. For its part, the UK auto industry received some relief from the existing 27.5 percent tariffs on autos through a UK-specific quota whereby the first 100,000 cars imported from the United Kingdom annually would be subject to the 10 percent tariff. The existing 25 percent tariff still applies to U.S. exports of auto parts, and the United Kingdom has not removed the 10 percent tariff on U.S. car exports to the United Kingdom. The subsequent June 16, 2025, executive order included exclusions for UK exports of jet engines and other aerospace parts from U.S. tariffs.

However, the EPD was not improved during the state visit. For example, the 25 percent tariff on steel and aluminum imports imposed by the United States on UK exports is unresolved. On the sensitive issue of U.S. tariffs on the United Kingdom's pharmaceutical sector, the EPD vaguely postponed bilateral discussions until the United States concludes its Section 232 investigation. Also in dispute is the United Kingdom's DST, whereby it collected $3.1 billion between 2001 and 2024, almost entirely from U.S. companies. Viewing the tax as discriminatory and contrary to existing tax treaties, the United States has threatened to reopen a Section 301 investigation into the DST. The United Kingdom, for its part, defers to ongoing international negotiations in the Organisation for Economic Co-operation and Development to preserve its ability to collect revenue from U.S. tech firms serving UK consumers.

And the stakes are high. The United Kingdom is one of the United States' largest trade and investment partners. In 2024, the United Kingdom was the primary destination for U.S. foreign direct investment (FDI), receiving 15 percent of U.S. investment abroad-totaling $1.02 trillion. Indeed, as of 2023, the United States was the largest contributor to the United Kingdom's inward FDI stock, accounting for 31.8 percent. The United Kingdom is the second-largest foreign investor in the United States. Similarly, the United States is the United Kingdom's largest single trading partner, accounting for 18 percent of total UK trade.

Private Sector Investment Takes Center Stage

Instead of improving the EPD, the Trump administration's effort at negotiating with the United Kingdom in connection with the state visit was dominated by private sector announcements of significant new investments of U.S. capital in generally underserved areas of the United Kingdom. U.S. firms such as Microsoft, Nvidia, and OpenAI committed approximately $130 billion in capital investment to build out digital infrastructure in the United Kingdom. Nvidia committed to selling a range of advanced AI chips to the United Kingdom, including the powerful Grace Hopper and Blackwell Superchips, to build AI factories and supercomputers.

Private investment is similarly the focus in the deal's provisions on nuclear power, with private energy companies pumping almost $40 billion into the UK nuclear sector. This large infusion of capital will demonstrably help the UK economy, which is struggling with chronic zero GDP growth and significant capital outflows due to recent tax law changes. "They owe us on this one," said one U.S. observer.

Technology Cooperation Framework

The memorandum of understanding (MOU) outlined at a very high level how the United Kingdom and the United States will unite to forge joint research schemes to further the use of AI for targeted treatments and other shared priorities like fusion energy. The document mentions aligning on technological "standards" and "advancing pro-innovation AI policy frameworks," but provides no details.

UK officials "see both countries working together to build new AI models for life-changing breakthroughs like developing targeted treatments for those suffering with cancer or rare and chronic diseases." While these types of partnerships are certainly meritorious in their aspirations, the details of constructing the bilateral scientific collaborations referenced in the MOU have yet to be resolved.

The Digital Trade Gap

Although U.S. competitive interests in the global economy continue to grow exponentially in the tech sector, there have been few improvements in market access for U.S. exports and no updated digital trade rules for many years. U.S. companies now export $68.5 billion in digital services annually to the United Kingdom, which supports over 3 million U.S. jobs, so this topic should be front and center in trade negotiations. With U.S. digital services exports growing about 10 percent a year, the bilateral trade balance is positive.

In terms of digital economy provisions, the topics on the trade agenda should include

1. rules to ensure free flow of trusted data between markets;
2. improvements to the durability of the U.S.-UK data bridge;
3. a reaffirmation of the World Trade Organization e-commerce moratorium on taxation of digital products;
4. elimination of the UK DST;
5. measures to promote harmonization standards for emerging technologies, including AI and quantum computing;
6. joint approaches to intellectual property protection in digital environments; and
7. new measures to protect markets from unfair trade practices, expand cybersecurity cooperation, and coordinate approaches to economic relations with China.

Structural Challenges

However, the President Trump's model of trade negotiations, pursued outside the traditional structure of congressionally agreed negotiating objectives, consultation requirements, and organized action-forcing deadlines, is so far yielding trade agreements that are more numerous, but less comprehensive, and of a more scattershot character than traditional trade deals-even as U.S. negotiating leverage stands, arguably, at its highest right now.

Finally, while there has been endless talk since the Covid-19 pandemic about increasing cooperation on economic security by taking measures to ensure the reliability and diversification of supply chains in pharmaceuticals, rare earths, and critical minerals, few concrete policies between the two trading partners in this regard have been adopted.

Preparing for Future Negotiations

An outside observer might contrast the domestic homework and preparation done by the two sides for the state visit. Whereas Congress has left development of a trade and tech relationship largely to the administration, the United Kingdom seems to have done more groundwork, interagency and parliamentary consultation, and consensus-building.

Former UK Ambassador to the United States Peter Mandelson, a past trade negotiator (recently dismissed for unrelated reasons), led comprehensive preparations on his side to undertake wide-ranging trade talks in connection with the visit. Speeches at the Chicago Council on Global Affairs and at Ditchley Park articulated a broad vision of what is possible for the U.S.-UK bilateral economic relationship in this new era of great power rivalry with China, Liberation Day tariffs in the United States, and security burden shifting. He predicted all too optimistically that at the core of the visit "will be new agreements that write the next chapter of transatlantic success; to create jobs, drive innovation and ensure that British and American ingenuity continues to lead the world.

Making the point that Britain has the opportunity to utilize its regulatory freedom and independence from European law to deepen U.S. investment opportunities in the country, he went on to warn that both countries have hollowed-out manufacturing industries and bred oversupply and overdependence on China. "Any strategy to compete with China," he said, ". . . will need to be collective, based on shared interests and costs."

The Path Forward

In light of the complex landscape of iterative and partial agreements with major trading partners, a broad, sustainable agreement with the United Kingdom that includes digital trade could serve as the high-water mark and guide for trade agreements going forward under the Trump trade regime. In the words of TechUK, "Being a partner in this kind of bilateral frontier tech agreement can give UK firms a competitive edge. As many countries race to set standards and capture leadership (AI, quantum, etc.), being in lockstep with the U.S. gives the UK sector credibility and influence."

Countering the geopolitical competition of China demands a new order of cooperation and coordination between the United States and the United Kingdom, particularly in the tech space, which should be a key priority for U.S. trade negotiators. The president and Congress should push forward one more time with the United Kingdom on a comprehensive trade and tech deal.

Meredith Broadbent serves as a senior adviser (non-resident) with the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

The author would like to thank Ophelia Bentley for her research assistance and editorial support.

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