UK Economy Grows by 0.5% in February Amid Trump Tariff Concerns

By: Aditi

Published on: Apr 11, 2025

Key Takeaways:

• UK GDP expanded by 0.5% in February, exceeding forecasts of 0.1% growth.


• Services and manufacturing sectors drove growth, with strong performances in IT, telecoms, and car sales.


• Chancellor Rachel Reeves reassures businesses and families amid fears over Trump’s 10% tariffs on UK exports.


• Economists warn of future slowdown due to global trade uncertainty and rising costs.


• Bank of England may cut interest rates as early as May to support economic stability.

UK Economy Shows Resilience with 0.5% Growth in February

The UK economy grew by 0.5% in February, according to the latest data from the Office for National Statistics (ONS). This figure surpassed economists' expectations of a 0.1% rise, providing a much-needed boost for Chancellor Rachel Reeves as she navigates the economic fallout from Donald Trump’s new tariff policies.

The growth was broad-based, with services, manufacturing, and construction all contributing positively. The ONS reported that:

• Services output increased by 0.3% (led by IT, telecoms, and car dealerships).


• Production output rose by 1.5% (boosted by electronics and pharmaceuticals).


• Construction output grew by 0.4%, signaling steady recovery.

Liz McKeown, ONS Director of Economic Statistics, stated:

“The economy grew strongly in February, with widespread growth across services and manufacturing. Car manufacturing rebounded, and key service sectors like programming and telecoms performed well.”

However, these figures predate Trump’s April 2nd announcement of a 10% tariff on UK goods, which has since rattled global markets and raised fears of a potential recession.

Rachel Reeves Vows Support Amid Trump Tariff Fallout

Chancellor Rachel Reeves acknowledged the positive GDP figures but cautioned against complacency, given the looming economic challenges:

“These growth figures are encouraging, but the world has changed in recent weeks. Families and businesses are understandably anxious about rising costs and trade disruptions. This government will remain pragmatic and focused on securing the best deal for Britain.”

The Labour government has made economic growth a top priority, aiming to improve living standards and business confidence. However, Marcus Brookes, Chief Investment Officer at Quilter Investors, warned:

“The UK economy remains fragile, and Trump’s tariffs have put us in a difficult position. While we avoided the worst of his initial announcement, the uncertainty will dampen business and consumer confidence.”

How Trump’s Tariffs Could Impact the UK Economy

The 10% tariff on UK exports to the US threatens several key industries, including:

• Automotive (car manufacturers face higher costs).


• Pharmaceuticals (increased prices for US-bound medicines).


• Financial services (indirect impact from global trade tensions).

Nicholas Hyett, Investment Manager at Wealth Club, noted:

“February’s GDP data feels like ancient history now. Trump’s tariffs, along with rising wage and national insurance costs, could derail growth in the coming months.”

Potential Consequences:

✔ Higher prices for UK exporters, reducing competitiveness.
✔ Possible job losses in affected industries.
✔ Slower economic growth if trade tensions escalate.

Will the Bank of England Cut Interest Rates Soon?

With global economic uncertainty rising, markets now expect the Bank of England (BoE) to cut interest rates in May, followed by two more reductions before year-end. Lower borrowing costs could:

• Stimulate consumer spending.


• Ease pressure on businesses.


• Support the housing market.

However, inflation risks remain, and the BoE will need to balance growth support with price stability.

What’s Next for the UK Economy?

While February’s GDP figures are positive, the bigger challenge lies ahead:

1. Trade Negotiations: The UK must secure favorable terms with the US to mitigate tariff damage.


2. Domestic Reforms: The government must boost productivity and investment.


3. Global Market Stability: Further volatility could impact the pound and stock markets.

Key Questions Moving Forward:

❓ Will the UK avoid a recession despite Trump’s tariffs?
❓ How will businesses adapt to higher export costs?
❓ Can the Bank of England’s rate cuts provide enough stimulus?

Final Thoughts

The UK’s 0.5% GDP growth in February is a welcome sign of resilience, but the real test begins now. With Trump’s tariffs in play and global markets on edge, the government and businesses must prepare for turbulent months ahead.

For now, Rachel Reeves’ reassurances and potential BoE rate cuts offer some stability—but the road to sustained growth remains uncertain.

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