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Concerns are mounting among British businesses after former U.S. President Donald Trump announced plans to target Value Added Tax (VAT) in his latest tariff strategy. The move could significantly impact UK exports to the United States, with potential tariffs of 20% or more being discussed.

Trump has instructed officials to develop “reciprocal tariffs”, meaning the U.S. would impose the same levies that its trading partners apply to American exports. The inclusion of VAT in tariff calculations has raised fresh concerns for the UK, which had previously been considered less vulnerable to U.S. trade taxes compared to other nations.

UK Businesses at Risk

Analysts warn that key UK industries—including automobiles, pharmaceuticals, and food and drink—could be hit hard by the proposed tariffs. The British Chambers of Commerce (BCC) has expressed concern over the potential disruption to trade, warning that Trump’s approach could “create more cost and uncertainty” for British exporters.

William Bain, head of trade policy at the BCC, acknowledged that the UK exports fewer goods to the U.S. compared to other countries, providing a small buffer. However, he cautioned that the introduction of VAT as a factor in trade tariffs could “upend established trade norms.”

George Saravelos, global head of FX research at Deutsche Bank, suggested that if the U.S. calculates tariffs based on VAT rates, UK exporters could face a 21% charge on their goods.

“If reciprocal tariffs are applied on a VAT basis, European countries would be much higher on the list of impacted countries,” Saravelos explained.

Trump’s Justification for Tariffs

The Trump administration has justified its tariff strategy by claiming VAT represents an “unfair, discriminatory, or extraterritorial tax.” The argument hinges on the fact that while VAT is applied to all goods sold in the UK, including those produced domestically, the U.S. operates under a much lower average sales tax system at the state level.

According to Paul Ashworth, chief UK economist at Capital Economics, VAT is widely regarded as a non-discriminatory tax. However, some of Trump’s economic advisers argue that VAT effectively acts as a hidden trade barrier against U.S. goods, making British and European exports subject to higher tariffs in response.

The Risk of a Trade War

Caroline Ramsay, partner and head of international trade at law firm TLT, warned that it remains “difficult to predict” exactly how Trump’s VAT-based tariffs will impact the UK.

“It does not mean that the USA is going to check what the UK tariff is on paper imports and match that tariff percentage for paper exports to the U.S. from the UK,” Ramsay explained. Instead, she said, the U.S. would likely make its own assessment of what it considers to be a “fair” tariff rate.

As uncertainty looms, UK policymakers face the challenge of responding to Trump’s unexpected move. Senior UK government minister Pat McFadden urged caution, stating, “The most sensible thing to do with all of these announcements is to digest them, see if they actually come to pass, and then decide what you do.”

For now, UK businesses are left in a state of uncertainty, awaiting further details on how Trump’s tariff plan will unfold—and whether the UK government will be able to negotiate exemptions before potential trade tensions escalate into a full-scale tariff battle.

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Apple Halts Advanced Data Protection in UK After Government Demand for Access

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Apple is removing its top-tier data encryption feature, Advanced Data Protection (ADP), from UK users following a government request for access to user data. The decision means that Apple customers in the UK will no longer be able to activate ADP, which ensures that only account holders can access their iCloud-stored content through end-to-end encryption.

The UK government made the request earlier this month, seeking the ability to access encrypted data under the Investigatory Powers Act (IPA), which mandates that companies must provide information to law enforcement agencies upon request. While Apple has consistently resisted creating encryption backdoors, citing potential misuse by cybercriminals, the company confirmed it would disable ADP activation in the UK starting Friday at 3 p.m. GMT. Existing users will also lose access at a future date.

“We are gravely disappointed that UK customers will no longer have access to this security feature,” Apple said in a statement. “We have never built a backdoor or master key into our products and never will.”

The Home Office declined to comment on the specific order, stating, “We do not comment on operational matters.”

Cybersecurity experts have criticized the government’s move, arguing that it undermines online privacy. Professor Alan Woodward of Surrey University called the decision “an act of self-harm” that weakens security for UK users. “It was naïve of the UK government to think they could dictate terms to a US technology company on a global scale,” he added.

The development has sparked backlash from privacy advocates, who describe the order as an “unprecedented attack” on individual privacy. Concerns have also emerged in the United States, where two senior politicians warned that the UK’s demands could jeopardize intelligence-sharing agreements between the two countries.

Despite the removal of ADP in the UK, the feature will remain available to users in other countries, raising questions about the global impact of the UK’s IPA order. In its statement, Apple emphasized its commitment to user privacy and expressed hope that it could restore ADP in the UK in the future. “Enhancing the security of cloud storage with end-to-end encryption is more urgent than ever before,” the company stated.

This latest dispute highlights growing tensions between governments seeking access to encrypted data and technology companies prioritizing user privacy, with potential implications for international regulatory frameworks and cross-border data security.

 

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European PMI Data Reveals Mixed Economic Signals

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February economic data across Europe showcased divergent trends, with the UK’s services sector seeing growth, Germany’s manufacturing hitting a two-year high, and France continuing to face challenges.

The flash estimate for France’s HCOB Manufacturing PMI rose to 45.5 in February from 45 in January, according to S&P Global. While still indicating contraction, this was the mildest decline since May 2024. The services sector, however, fell more sharply, with its PMI dropping to 44.5 from 48.2, driving the composite PMI to 44.5—the steepest contraction since September 2023. Economist Dr. Tariq Kamal Chaudhry of Hamburg Commercial Bank noted that shrinking order intakes and subdued future activity expectations remain key concerns.

In contrast, the UK’s services sector expanded, with its PMI rising to 51.1 from 50.8, surpassing analyst expectations. Despite this growth, new work fell at the fastest rate since November 2022 due to weakened business investment and budget cuts. The UK manufacturing sector continued to contract, with its PMI falling to 46.4 from 48.3, missing market forecasts.

Germany’s manufacturing PMI climbed to 46.1, its highest in two years, supported by slower declines in factory output. Meanwhile, the services sector experienced a slight dip, with its PMI at 52.2 compared to 52.5 in January. Overall, Germany’s private sector remains affected by manufacturing challenges, though the pace of contraction has slowed.

Across the eurozone, the composite PMI held steady at 50.2, signaling marginal growth but falling short of expectations. The manufacturing PMI rose to 47.3 from 46.6, while the services PMI dropped to 50.7 from 51.3. Kyle Chapman, FX markets analyst at Ballinger Group, noted that while modest growth is preferable to contraction, consumer caution due to political and economic uncertainty continues to limit recovery.

In the UK, Chapman pointed to the impact of rising payroll taxes on employment, with one-third of surveyed companies linking lower staffing levels to the October budget. Weak demand and stagnant productivity levels are further hindering the country’s economic performance.

The latest PMI data highlight the complex economic landscape in Europe, with some sectors showing signs of resilience while others grapple with ongoing challenges, influenced by both domestic policies and broader global conditions.

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Apple Unveils iPhone 16e With AI Features at a Lower Price

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Apple has introduced the iPhone 16e, a new smartphone that brings advanced artificial intelligence (AI) capabilities at a more affordable price point than its flagship models.

The device is powered by the same A18 processor found in the premium iPhone 16 and offers similar storage options. However, it comes with fewer cameras and lower overall specifications. Priced at £599 in the UK—£200 less than the iPhone 16—the iPhone 16e is positioned to attract budget-conscious consumers while showcasing Apple’s latest advancements in AI technology.

Pre-orders open on February 21 in 59 countries, with the phone expected to be available in stores shortly after.

A New Approach to AI Integration

Apple has faced challenges in recent years as iPhone sales have slowed. With the iPhone 16e, the company hopes that integrating Apple Intelligence—its branded suite of AI features—will reignite consumer interest. The device includes tools for text generation, image editing, and enhanced searches within photo libraries. Additionally, Siri now incorporates OpenAI’s ChatGPT, expanding the virtual assistant’s capabilities.

Apple CEO Tim Cook highlighted the phone’s potential during the launch, emphasizing its performance, privacy features, and ability to help users “save time, get more done, and express themselves in new ways.”

Industry analyst Paolo Pescatore told BBC News that the lower-priced iPhone 16e could accelerate consumer adoption of AI, calling it “one of the most affordable powerful iPhones now on the market.”

However, not all experts are convinced of its impact. Cory Johnson, chief market strategist at Epistrophy Capital Research, pointed out that Apple has invested $189 billion (£150 billion) in AI over the last decade with limited success. “All we have to show for that is the HomePod and $3,500 ski goggles,” he remarked, referencing the slow sales of the Vision Pro headset.

Apple’s First In-House Modem

One notable feature of the iPhone 16e is its C1 modem, Apple’s first proprietary cellular modem. Previously, the company relied on chips from Qualcomm and Intel, often incurring high licensing fees and engaging in legal disputes. Developing its own modem aligns with Apple’s long-term goal of controlling more components within its devices.

Tech influencer Marques Brownlee highlighted the significance of the modem on social media, calling it the “most lowkey interesting thing” about the new phone.

Targeting New and Existing Customers

Analysts believe the iPhone 16e could help Apple expand its market share, particularly in price-sensitive regions like India, where high-end iPhones are beyond the reach of many consumers. Forrester principal analyst Dipanjan Chatterjee noted that the phone’s affordability could also attract first-time Apple users, introducing them to the company’s ecosystem of devices and services.

Apple is also targeting owners of older iPhone models. A comparison tool on its website shows how the 16e stacks up against models dating back to 2019, accompanied by the message: “There’s never been a better time to upgrade.”

With a competitive price, powerful AI features, and new hardware innovations, the iPhone 16e could play a key role in revitalizing Apple’s smartphone sales in the coming year.

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