UK economy falls after tax hike, U.S. tariffs

United Kingdom’s economy shrank more than expected in April following a tax hike on UK businesses.

This also follows a record drop in exports to the United States due to President Donald Trump’s tariffs.

Gross domestic product contracted 0.3 percent in the month, compared to 0.2 percent growth in March, the Office for National Statistics (ONS) said in a statement on Thursday, June 12, 2025.

Analysts’ consensus had been for a GDP contraction of 0.1 percent in April.

Exports of British goods to the United States fell by a record £2 billion ($2.7 billion) the same month, the ONS revealed, following the introduction of Trump’s tariffs onslaught.

The data comes one day after Prime Minister Keir Starmer’s Labour government laid out its priorities for the coming years, hoping that changes to day-to-day spending amounts and longer-term investment will spur Britain’s sluggish economy.

Chief UK economist at research group Capital Economics, Paul Dales, noted that the economy faced “subdued overseas demand and domestic businesses cutting back on spending to compensate for the rise in costs driven by April’s increase in taxes.”

Following Labour’s return to power last July, following years of Conservative rule, Reeves announced a tax rise for UK businesses which entered force in April.

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Official data this week showed that the hike had contributed to a small rise in Britain’s unemployment rate and slowdown to growth in average wages.

The latest data follows also the introduction of a baseline 10-percent tariff imposed on the UK and other countries by Trump at the start of April.

The UK and U.S. have since struck a trade agreement that cuts tariffs on British cars and scraps them on steel and aluminium.

Britain in return has agreed to open up its markets to United States beef and other American farm goods.

But the UK remains subject to a 10-percent tariff on most goods exported to the United States, AFP reported.

Decreases in exports to the United States in April were seen “across most types of goods, following the recent introduction of tariffs”, said ONS director of economic statistics, Liz McKeown.

Official data earlier this year showed trade in goods between the UK and U.S. remained balanced in 2024.

Britain imported £57.1 billion ($77 billion) worth of American goods last year and exported products worth a total of £59.3 billion.

The Star