UK trade tumbles as US tariffs bite hard

The United Kingdom's economy faltered in April, hit by twin shocks from United States President Donald Trump's sweeping tariff measures and the expiration of property tax incentives, according to official figures released on Thursday.

Gross domestic output contracted by 0.3 percent in April, a steeper decline than the 0.1 percent economists forecast and marking the largest monthly drop since October 2023. This decline followed 0.2 percent growth in March.

UK trade with the US plummeted in April following Trump's tariff announcement that hit demand for goods, reported the Office for National Statistics, or ONS.

Exports of UK goods to the US declined by 2 billion pounds ($2.7 billion) in April, the ONS reported. It was the largest monthly reduction in trade with the US since records began in January 1997 and followed four months of consecutive increases.

There was a significant decline in real estate activity following the expiration of a temporary housing tax break, accounting for 0.2 percentage points of April's overall 0.3 percentage point drop in output, said the ONS.

ONS director of economic statistics, Liz McKeown, said: "Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March, when buyers rushed to complete purchases ahead of changes to stamp duty."

Another key factor in the monthly GDP decline was a 0.4-percent contraction in the services sector, with UK hospitality and businesses particularly impacted by increased National Insurance contributions, the country's employer payroll taxes.

The automotive sector also experienced reduced production and lower export volumes to both US and European Union markets, said the ONS.

The UK's finance minister, Chancellor of the Exchequer Rachel Reeves, described the GDP numbers as "clearly disappointing" and said: "Our number one mission is delivering growth to put more money in people's pockets through our plan for change, and while these numbers are clearly disappointing, I'm determined to deliver on that mission."

Thursday's data emerged a day after Reeves set out a multi-year spending review that allocated more than 2 trillion pounds of public spending across government departments.

So far, the UK is the only major economy to secure a US trade agreement aimed at partial relief from Trump's heightened aluminum and steel tariffs, though a 10 percent levy persists on goods. The US and China this week drafted a preliminary trade agreement.

Analysts cited by Reuters remain cautious about the UK's economic outlook, despite recent attempts to stabilize trade relations.

"Looking through the noise and data quality issues, we expect the underlying pace of growth to remain underwhelming over the next couple of years," said Matt Swannell, chief economic advisor to the EY ITEM Club. 

"The drag from US trade policy has added to a range of domestic headwinds, including the significant tightening of fiscal policy and the lagged pass-through of past interest rate rises."

jonathan@mail.chinadailyuk.com