UK inflation jumps to 3.5 per cent in April; Trump tariffs and trade tensions add fuel

Britain’s inflation rate unexpectedly surged in April, rising to 3.5 per cent from 2.6 per cent in March, according to the Office for National Statistics (ONS). This marks the highest level since January 2024 and represents the sharpest monthly rise since 2022, when prices were spiralling above 10 per cent.

A sharp spike in airfares during the Easter holidays was a key contributor, with ticket prices rising by 27.5 per cent from March, the second-largest monthly jump on record.

The timing of Easter, which fell in April this year, intensified seasonal travel demand, amplifying the price surge.

As per Reuters, economists had expected consumer price inflation to rise to 3.3 per cent, while the Bank of England (BoE) forecast 3.4 per cent. The stronger-than-expected figure complicates the central bank’s efforts to gradually bring inflation under control.

Services inflation surges, rattling BoE

More concerning for policymakers is the jump in services inflation, a key indicator of domestic price pressures.

According to the ONS, services prices rose by 5.4 per cent year-on-year, outpacing both the BoE’s forecast of 5.0 per cent and the Reuters consensus of 4.8 per cent.

On a monthly basis, services inflation rose 2.2 per cent, the highest single month increase in over three decades.

This suggests that inflationary momentum remains embedded in the economy, especially in sectors like hospitality, transport, and insurance.

The data comes amid warnings that persistent wage pressures and strong consumer demand could delay further interest rate cuts.

Government reaction and policy outlook

Finance Minister Rachel Reevescalled the inflation figures “disappointing,” telling Reuters. “We are a long way from the double-digit inflation we saw under the previous administration, but I’m determined that we go further and faster to put more money in people’s pockets” as qoutes by Reuters.

Following the data release, investors slashed the odds of a BoE rate cut in August to 40 per cent, down from 60 per cent. According to Reuters, only 35 basis points of cuts are now expected by the end of 2025.

Patrick O’Donnell, Senior Investment Strategist at Omnis Investments, told Reuters, that “This data should call into question whether there is a cut… in August.”

BoE Chief Economist Huw Pill also expressed caution and told Reuters that the pace of rate cuts may have been too quick in light of still-strong wage growth and inflationary stickiness. He voted to hold rates steady earlier this month and described the move as a “skip,” not a stop.

Trade tensions escalate

The inflation surge coincides with rising global trade tensions, placing the UK in a delicate position between major partners.

US President Donald Trump, now in his second term, reintroduced 25 per cent tariffs on UK steel and aluminium exports in March 2025 — reversing earlier exemptions and reigniting trade war anxieties.

In response, UK-US negotiations were fast-tracked. By 8 May 2025, according to Reuters, the two sides struck a provisional deal: the US agreed to remove the 25 per cent metals tariffs in exchange for a 10 per cent baseline tariff on most UK goods.

In return, the UK dropped its 20 per cent retaliatory tariff on US beef and introduced a quota for tariff-free beef imports.

Though the deal eased immediate pressure, it underscored the fragility of the long-delayed UK-US free trade agreement, which has repeatedly stalled since Brexit.

Trade analysts warn that Trump’s broader protectionist stance, targeting not just the UK, but also the EU and Asian markets and may drive up global import costs and further fuel UK inflation.

Five years after the United Kingdom’s departure from the European Union, both parties have signed a comprehensive agreement aimed at revitalising their relationship. This deal addresses key sectors such as trade, defence, energy, and fisheries, marking a significant step in UK-EU relations.

The agreement comes at a time when global trade dynamics are shifting, notably with the United States imposing new tariffs under President Donald Trump’s administration

In May 2025, the UK and EU signed supplementary protocols aimed at smoothing trade flows, reducing border delays, and clarifying rules for Northern Ireland.

While not a renegotiation of the core agreement, these developments are seen as an attempt to stabilise cross-Channel commerce after five years of adjustment and uncertainty.

April pain likely to linger

April’s inflation surge took place during what British media had dubbed “Awful April”, a month marked by higher gas, electricity, and water bills, as well as increased employer taxes — all adding to the price burden on households and businesses.

The BoE now expects inflation to climb to 3.7 per cent by September, raising concerns that the road to price stability may be longer and bumpier than previously anticipated, as per Reuters.

While some employers are reportedly beginning to scale back wage increases, the data suggest the broader cost-of-living challenge is far from over.

With Trump’s tariffs, volatile energy prices, and sticky services inflation all in play, the BoE faces growing pressure to tread carefully in its monetary strategy.