UK GDP Contracts Again as US Tariffs and Taxes Bite

- UK GDP falls 0.1% in May, marking the second consecutive monthly decline. - Manufacturing, construction, and retail sectors face significant pressure, intensifying recession fears. The UK economy faces mounting pressures as GDP shrank for the second consecutive month, raising concerns about a potential recession. On July 11, 2025, the Office for National Statistics reported that GDP contracted by 0.1% in May, following a sharper 0.3% decline in April. The slump was driven by US tariffs on UK goods, rising domestic taxes, and persistent inflation, which continue to weigh heavily on key industries and consumer activity. On April 5, the United States imposed a 10% baseline tariff on UK imports, in addition to placing even higher tariffs on goods like steel and aluminum. Although a May trade agreement aimed to ease some of these duties, UK exports to the US remain weak. As a result, export activity saw only a modest rebound in May and remains significantly depressed after April’s steep drop. The manufacturing and construction sectors, which are especially vulnerable to trade disruptions, recorded their steepest declines in a year. Domestically, high inflation and increased taxes have eroded household spending, dragging down retail sales. Consumers are grappling with higher costs for everyday goods, while property transactions slowed as the housing market cooled. Meanwhile, the services sector, which comprises the largest share of the UK economy, recorded minimal growth of just 0.1% in May, underscoring the broader economic stagnation. The labor market has also faced significant strain as businesses cut costs amidst sluggish activity. Since October 2024, businesses have cut more than 250,000 jobs, a loss that has intensified economic uncertainty and placed further pressure on households. To combat the decline, many expect the Bank of England to reduce interest rates as early as August. However, experts caution that rate cuts alone may not be sufficient to address the deeper structural challenges underlying the slowdown. Meanwhile, in the cryptocurrency markets, data from CoinMarketCap on July 11 showed Bitcoin (BTC) trading at $30,645, with a 1.5% increase in its 24-hour trading volume. In the same timeframe, Ethereum (ETH) stood at $2,120, marking a 2.1% change.