In April 2025, UK exports to the United States experienced an unprecedented slump, marking the largest recorded monthly drop in trade between the two nations. This sharp contraction followed the implementation of US tariffs introduced by President Trump, designed as a “reciprocal” response to previous UK, European, and other trading partners’ measures.
The decline was severe, with UK goods exports to the US falling by £2 billion in just one month, contributing to an overall 9% decrease in UK goods exports for that period. Non-EU markets, led by the US, saw a 12.6% reduction in sales. As a result, the UK’s trade deficit widened to £11.5 billion over a three-month span, driven by tumbling exports and increased imports.
This sudden downturn has not only affected large corporations but has been especially damaging to small and medium-sized enterprises (SMEs), with 59% of these exporters heavily reliant on US trade. The US imposed a 10% tariff on UK goods and a 25% tariff on cars, creating significant barriers that led many UK businesses to hold off on exports to avoid incurring heavy costs.
UK Government’s Measured Response to Tariffs
Faced with the damaging economic fallout, UK government officials have adopted a cautious but strategic approach. The UK’s Business and Trade Secretary publicly condemned the tariffs as “deeply regrettable,” while reassuring industries that negotiations for a formal US-UK trade deal are firmly underway. The government has expressed the hope that diplomacy and dialogue will defuse escalating tensions without triggering a full-scale trade war.
Prime Minister Keir Starmer addressed the situation by underlining the challenges posed by a “new era” of international relations, characterized by shifting alliances and uncharted regulatory territory. He emphasized that retaliation would not be the first course of action, arguing that “no one benefits from a trade conflict.” Starmer’s remarks suggest a preference for measured engagement to protect the fragile UK economy while pursuing new trading agreements to replace the disrupted market access.
Business Sector Warns of Economic Damage and Uncertainty
The UK’s business community has voiced strong concerns about the tariff war’s disruptive effects. The Federation of Small Businesses identified the 10% tariff rate as a “significant setback,” warning it could hinder growth and global competitiveness for SMEs. Many industry leaders representing manufacturing, automotive, and e-commerce sectors shared fears of job losses, squeezed profit margins, and a significant decline in investment due to heightened market uncertainty.
For smaller businesses, the tariffs are especially challenging. Beyond the direct costs, the end of the US “de minimis” exemption means that more goods are subjected to customs duties and procedural delays, creating additional administrative burdens and financial risks. Many firms have chosen to pause exports to the US altogether, awaiting a clearer trade deal or alternative market opportunities.
Economists have echoed business leaders’ concerns, predicting that if the trade tensions persist, the UK economy could face a GDP reduction of up to 2.5% within three years. They highlight how uncertainty surrounding US trade policies has already discouraged investment and disrupted long-standing supply chains critical to UK exports.
Economic Impact and Shift in Trade Patterns
The immediate economic impact is evident in the UK’s contracting GDP, which shrank by 0.3% in April 2025, partially due to the export freeze to the US. The National Institute of Economic and Social Research warns that prolonged tariff barriers could have lasting effects on economic growth, potentially shaving several percentage points off future GDP.
Key affected sectors include pharmaceuticals, machinery, and automotive manufacturing. These industries depend heavily on smooth transatlantic trade and now face heightened costs and logistical complexities. For SMEs and e-commerce retailers, the situation is particularly dire, as added tariffs and customs complexities limit their ability to compete in the US market. Many businesses are redirecting their focus to alternative markets in order to mitigate losses, though this process entails significant operational challenges.
Global Market Reactions and Future Risks
The tariff measures escalate beyond UK-US relations and shake broader global markets. Stock markets reacted negatively to tariff announcements, with the FTSE 100 and Wall Street experiencing volatility amid increasing fears of a deepening trade war. President Trump’s tariffs, including the reciprocal 10% levy and threatened 50% steel tariffs, represent a fundamental shift in international trade policies and reflect a more protectionist US stance.
Despite the UK securing the lowest reciprocal tariff rate globally, the ongoing unpredictability fuels economic uncertainty. The possibility of more aggressive US measures remains, leaving UK businesses in a state of flux as government officials continue to negotiate.
Prime Minister Starmer and UK trade officials underscore the need to navigate this “new era” prudently, balancing international diplomacy with robust protection of domestic industries. The path ahead involves complex negotiations and the urgent need for a new trade agreement that can stabilize UK exports and restore confidence in transatlantic commerce.
This evolving situation highlights the significant toll President Trump’s tariff war is taking on UK exporters, particularly SMEs, and signals a challenging period for international trade relations. The combination of steep tariffs, economic contraction, and political sensitivity underscores the urgent need for a strategic response capable of safeguarding UK businesses and preserving economic growth.
