London
CNN
—
Britain’s economy shrank by the most in nearly two years in April, when President Donald Trump’s tariffs also caused UK goods exports to the United States to fall by a record amount.
Gross domestic product contracted by an estimated 0.3% that month – after expanding 0.2% in March – according to the Office for National Statistics, the sharpest month-on-month decline since October 2023.
The drop was largely due to a contraction in the services sector, which took a knock after the government ended a tax break for some home buyers.
But Trump’s trade war also played a part.
Rachel Reeves, Britain’s finance minister, told the Sky News broadcaster Thursday that April had been a “challenging month.”
“There was a huge uncertainty about tariffs… If you dig into those GDP numbers today, (we see) exports weakening and also production weakening because of that uncertainty in the world around tariffs,” she said.
The value of UK goods exports to the US fell by £2 billion ($2.7 billion) in April compared with March – the largest drop since records began in 1997. The statistics office said the fall was “likely linked to the implementation of tariffs” on Britain’s US-bound exports.
On April 2, Trump announced a battery of new tariffs on America’s trading partners, including a baseline 10% levy on goods exports to the US and country-specific “reciprocal tariffs,” although he has delayed the implementation of these until early July. The president has also imposed new tariffs on steel, aluminum and car imports.
The United Kingdom has got off relatively lightly, with Trump applying only the baseline 10% tariff on imported British goods and agreeing to scrap tariffs on UK steel and aluminum. Britain was the first country to hash out a framework for a trade deal with Washington, which also included an agreement to lower tariffs on some imports of British cars.
Even so, the tariffs, their erratic implementation and the resulting economic uncertainty have weighed on businesses and consumers in the UK.
Yael Selfin, chief economist at KPMG UK, a consultancy, said Thursday that the accord between the US and the UK offers British “businesses a degree of policy certainty,” yet tariffs on UK exports to America are still higher than their pre-April levels.
“This is expected to act as a headwind for UK trade in the medium term,” Selfin wrote in a note.