The UK economy shrank by 0.3% in April as Donald Trump’s trade tariff war and higher taxes cast uncertainty over the country’s financial outlook.
The latest GDP figures provided by the Office for National Statistics (ONS) are thought to be considerably worse than the expected fall, which was thought to come in around 0.1%.
Speaking to the BBC, Chancellor of the Exchequer Rachel Reeves branded the economic decline as “disappointing”, but noted that April had been a particularly “challenging month.”
The ONS also noted that Trump’s complicated trade war had some role to play in a significant drop in goods exports from the UK to the United States.
“April saw the largest monthly fall on record in goods exports to the United States with decreases seen across most types of goods, following the recent introduction of tariffs,” the ONS said.
The news comes as Trump reportedly prepares to sign off on a major agreement in a UK-US ‘trade deal’ that will reduce tariffs on UK car exports to the US in exchange for enhanced access to the UK market for beef and ethanol producers.
Despite much uncertainty about what Trump’s dramatic tariffs on trade partners around the world would mean, many markets are now starting to feel the ripple effects of these policies.
Although the UK is thought to have gained more favourable concessions than some other countries, as it stands several UK industries are feeling the impact of a 10% baseline implemented in Trump’s tariffs.
So what does this mean for the UK economy?
What sectors would be affected most by the tariffs?
Some of the most significant industries thought to have been impacted by the tariffs were UK car manufacturers and steel and aluminum exports. However, the fast-moving nature of Trump’s tariff agreements means that a lot has changed since he first announced his tariff proposals.
All three sectors were initially subject to a 25% tariff, but a ‘historic’ deal was struck in May to reduce the aluminium and steel tariffs to zero and the tariffs on UK car manufacturers to 10%.
The tariffs were thought to remain in place until July, but recent meetings between UK and US counterparts suggest that trade agreements could be enacted earlier.
While this signals a hopeful outlook for the future, uncertainty remains regarding Trump’s volatile economic policies, and it’s already impacted trade in the last few months.
What’s more, not just exporters would feel the change. Operations companies, like those providing transport, may also still experience knock-on effects, as would services like insurance and finance.
Could any sectors benefit?
It’s not all bad news. Some sectors could benefit from the even higher taxes levelled at Chinese exporters, such as textiles and clothing.
How has the UK responded to Trump’s plans?
In November 2024, Foreign Secretary David Lammy said: “We will seek to ensure and to get across to the United States—and I believe that they would understand this—that hurting your closest allies cannot be in your medium or long-term interests, whatever the pursuit of public policy in relation to some of the problems posed by China.”
Elsewhere in the Cabinet and beyond, Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey also affirmed at the time that they will continue to make the argument for free trade.
This then culminated in the UK-US trade deal agreed upon in May 2025, offering relief on UK cars, steel and aluminium.
Following the deal, Keir Starmer said: “I know people along the way were urging me to walk away, to descend in a different kind of relationship. We didn’t. We did the hard yards. We stayed in the room. I’m really pleased to say to the workforce here and through them to the country, how important I think this deal is.”
