Tech Trade or Digital Drama? The United States, the UK, and the EU (Center for the National Interest)

Center for the National Interest — Panel Discussion

Opening Remarks of Paul Steidler, Lexington Institute

May 8, 2025

The full event can be viewed at the link here.

There is real drama, and the stakes are quite high in the US-United Kingdom tech relationship.

The reason is AI and our strategic relationship with China. As the United States needed allies to defeat the USSR in the Cold War, so too we need allies in our present-day economic and military competition with China.

As a reminder, AI is about a great deal more than generating quirky videos and pictures or kids using it to sidestep homework.

AI will determine who is strongest militarily. It will determine who has the dominant economic system from which even more rapid innovation can be made in the future. That is why keeping and expanding America’s AI lead now is so critical.

AI is also about global influence, that is: Will countries use AI systems and practices developed by American companies or those driven by Chinese enterprises and its Communist government? China is already using AI to spy and suppress dissidents and sharing that technology with other authoritarian regimes.

For these reasons and more, a technology free trade agreement between the US-UK is not only in both countries’ best interest, but the entire free world. And other countries should be invited to join that or similar pacts once it is completed.

A US-UK free trade accord will also give the US greater leverage in our trade negotiations with the European Union. This pertains to digital services taxes and onerous regulations implemented against US companies, such as the Digital Services Act and Digital Markets Act. It will also help with our broader EU trade discussions.

The UK has consistently been one of America’s most reliable trading partners since the end of the American Revolution. US companies will benefit from having greater and less restricted access to the UK’s market of nearly 70 million people. The UK will benefit from hundreds of billions of US tech investments.

The basis for such an agreement is for the EU to remove its taxes and onerous regulations on US tech companies. The US and UK will then have no tariffs on one another for digital services.

The UK already has a strong tech sector.

The Stanford University 2025 AI Index, released on April 10, documented that it is the third biggest country in the world for AI, behind the US and China. This applies to both established and newly formed companies.

From 2013-24 the UK had 885 newly funded AI companies, more than half the amount of China (1,605) and its much larger population. In Europe, the runner-up country to the UK was France, a distant second with 465 companies. In 2024 alone, the UK had 116 newly funded companies.

From 2013-24, the UK also beat out all European countries for global private investment in AI, securing $28.2 billion during that period, far ahead of Germany, in a distant second place at $13.3 billion.

Beauhurst, a UK consulting firm, has also measured the growth and strength of the UK’s AI sector. In a January 8 report, the firm found that “The UK—particularly the golden triangle of London, Oxford, and Cambridge—is a popular place for artificial intelligence startups…There are currently 2,361 AI companies across the UK that have hit one or more of our high-growth signals…” The firm found that the UK AI market had mushroomed by almost $10 billion worth of equity investments between 2022 and 2025.

There are, though, currently significant problems for US tech companies operating in the UK.

The UK collects $1 billion annually through digital taxes on large US tech companies. Under the UK’s Online Safety Act, there are numerous free speech and content restrictions, for which American citizens could face punishment even if they post such content in the US and then travel one day to the UK. Vice President Vance and Elon Musk have both spoken out often and vigorously against this.

The UK’s chief business regulator, its Competition and Markets Authority, is also investigating a host of US companies for various arcane reasons.

Back to the good news: UK Prime Minister Keir Starmer is eager for a digital accord with the US. During an October 14 investment conference, he made clear that the UK was on a mission to become more business friendly, especially regarding tech investment.

“It’s time to upgrade the regulatory regime…We will rip out the bureaucracy that blocks investments,” said Starmer. “We will march through the institutions, and we will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does.”

On February 26, the day before a meeting with President Trump, Starmer’s office issued a press release saying, “The discussion will have a particular focus on the opportunities that further technology and AI partnerships could deliver…The U.S. and UK are the only two allied countries in the world with trillion-dollar technology eco-systems, and the Prime Minister will make the case for further integration.”

Both President Trump and Prime Minister Starmer were pleased with the February 27 meeting. In March, Peter Kyle, the UK’s Secretary of State for Science, Innovation, and Technology, spent a week in the US with tech leaders and others, effectively campaigning for the accord.

Earlier today, the President and Prime Minister Starmer announced the framework for a comprehensive trade accord. While largely centered on other sectors than tech, this is an encouraging development.

We should watch for, and encourage further progress so that both countries and the free world will not only benefit – but prosper enormously from AI and prevail over China in the central challenge of our time.

Thank you and I look forward to the discussion.