March and April were perhaps the most difficult months for the United Kingdom’s economy since World War II. After hearing last week’s blows in both trade and GDP. UK Gross Domestic Product (GDP) is estimated to have contracted by 0. This downturn has raised fears about the UK trade medium-term prospects. This scenario is exacerbated by the trade war that former U.S. President Donald Trump initiated and has continued through today.
Rachel Reeves, shadow finance minister of the new opposition government in Britain, raised alarms about the global negative economic trends. She illustrated the unpredictability of tariffs and how it affects their ability to trade and manufacture.
“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,” – Rachel Reeves
Their effect has been the most severe in the export sector, which forms the backbone of the economies of many swing states. This overview followed the Office for National Statistics good value to report a £33 billion annual drop in UK goods exports to America. Exports in April dropped an astonishing £2 billion ($2.7 billion) from their March level. This $3.3 billion drop is the biggest monthly decline in exports to the U.S. on record (dating back to 1997). Analysts believe this substantial decrease is “likely linked to the implementation of tariffs” imposed on British exports to America.
Then came April 2, when Trump first announced new tariffs on all other trading partners. This announcement comes with a starting point of a 10% levy on goods sent to the U.S. Due to the widespread outcry, the implementation of these tariffs was pushed back until early July. It’s businesses in the UK that are already feeling the impact. The uncertainty surrounding these tariffs has weighed heavily on both businesses and consumers, leading to a more cautious economic environment.
Yael Selfin, chief economist at KPMG UK, touched on something big. The UK recently successfully negotiated a lower-tariff trade deal with the U.S., particularly protective of British automotive interests. The entire trade landscape remains fraught.
“This is expected to act as a headwind for UK trade in the medium term,” – Yael Selfin
Despite the existence of trade agreements, tariffs on UK exports to America are still significantly higher than they were prior to April. Consequently, British businesses are still being hit hard as they try to operate in this complicated new trade environment.