A Boost to U.S. Finances and a Drag on the British Economy — Diverging Impacts of Trade Policies on the West’s Two Largest Economies

While tariff revenues have helped reduce the U.S. budget deficit,
the same policies have triggered the first contraction in the British economy in six months.

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United States
United Kingdom

United States

U.S. Budget Deficit Narrows in May, Driven by a Surge in Tariff Revenues
Data released by the U.S. Department of the Treasury on Wednesday showed that the U.S. federal budget deficit narrowed in May to $316 billion, a 9% decrease—or $31 billion—compared to the same month last year.

This decline was mainly driven by a sharp increase in tariff revenues, which hit a record $23 billion, up from just $6 billion in May 2024.

Since the beginning of the current fiscal year, tariff revenues have risen by 60%, reaching $86 billion. This contributed to a 15% year-over-year increase in total government revenues in May, which stood at $371 billion. Meanwhile, expenditures rose to $687 billion, up by $16 billion.

Additionally, interest payments on the U.S. national debt fell to $92 billion last month, an $11 billion drop compared to the same month last year, following another $1 billion decrease in April.

United Kingdom

UK Economy Sees First Contraction in Six Months Due to Tariff Shock
The United Kingdom’s economy experienced a sharp contraction in April, surpassing analysts’ expectations, as the negative fallout from escalating reciprocal tariffs imposed by the U.S. administration weighed on global trade.

According to official data released Thursday, the UK’s gross domestic product (GDP) shrank by 0.3% in April compared to March, whereas analysts had forecast only a slight 0.1% decline. The drop was driven by contractions in both manufacturing and services, while construction showed limited growth.

This marks the first monthly contraction in the British economy in six months, raising questions about the new government’s ability—under Prime Minister Keir Starmer—to deliver on its promises to stimulate economic growth and fund ambitious programs.

The UK economy had previously recorded a 0.7% growth rate in the first quarter of this year, outperforming other G7 nations, but April’s data signals growing challenges that may undermine the sustainability of this performance.

A Boost to U.S. Finances and a Drag on the British Economy

A Boost to U.S. Finances and a Drag on the British Economy

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