The UK economy experienced a significant and unexpected downturn in April, with the Gross Domestic Product (GDP) contracting by a sharp 0.3%. This figure, released by the Office for National Statistics (ONS), surpassed economists' forecasts, who had predicted a milder contraction of just 0.1% according to a Reuters poll.

The primary driver behind this economic shrinkage was the implementation of steep tariffs by President Trump, under an initiative referred to as "Liberation Day." These tariffs were applied to countries globally and notably ignited a trade war with China, the world's second-largest economy.

This economic contraction presents a setback for Chancellor Rachel Reeves, who has designated economic growth as her foremost priority. Compounding the situation, businesses faced additional costs during April due to the enforcement of higher minimum wages and increased employer national insurance contributions.

Despite the sharp decline in April, an examination of the economy over a three-month period reveals growth, suggesting that anticipation of trade disruptions may have accelerated business activity into the earlier months of the year. However, April saw significant contractions in key sectors: the dominant services sector, the largest part of the economy, shrank by 0.4%, and industrial production fell by 0.6%.

A critical consequence of the tariffs was a substantial impact on international trade. The ONS reported the largest ever monthly fall in goods exported to the United States. This decrease was widespread across most types of goods, directly attributed to the newly imposed tariffs.

Further economic pressures were observed in other areas. Higher stamp duty rates dampened house buying activity, adversely affecting legal and real estate firms. Additionally, after a robust performance in the first three months of the year, the car manufacturing sector performed poorly in April.