Rachel Reeves has been put in her place over her Trump claim (Image: PA)
Downing Street has slapped down Rachel Reeves after the Chancellor suggested Donald Trump was to blame for Britain’s shrinking economy. A No 10 spokesman denied that the US president’s tariffs were to blame for a contraction in the economy at the start of the year.
Ms Reeves had appeared to point the finger at Mr Trump’s administration after official figures showed the UK’s gross domestic product (GDP) shrank in January by 0.1%. However, the Prime Minister’s official spokesman said “no” when asked if the US president was at fault. He added: “We know the cost-of-living crisis is not over, and this Government is determined to make people better off, and that’s why economic growth is the Prime Minister’s number one priority.
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READ MORE: Rachel Reeves could 'tip Britain into recession' as economy begins to shrink
A graph showing the UK's GDP (Image: PA)
“Growth is what funds our public services, it is what enables investments in our hospitals and schools and, of course most importantly, raises living standards for everyone, everywhere.”
Ms Reeves had said “the world has changed and across the globe we are feeling the consequences” after official figures delivered a blow to her growth ambitions.
Mr Trump was inaugurated in January and had promised to impose tariffs on his first day in office after his election in November.
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Ms Reeves would not comment directly on the US president but suggested his tariffs would damage the economy.
The Chancellor told broadcasters during a visit to Scotland: “I believe, this Government believes, in free and open trade, and will continue to make that point.
“We are in negotiations at the moment for an economic agreement with the United States to try and ensure that British exporters are supported to export all around the world, including to the United States, and to ensure that they don’t push up prices for UK consumers with more tariffs.”
GDP by month (Image: PA)
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It comes as experts warned Britain could tip into recession following the fall in GDP despite the Chancellor's high-profile push for growth.
The warning is a further crushing blow for the UK and lays bare the negative impact of Ms Reeves’ nightmare Budget.
And it raises questions with looming headwinds from her massive national insurance raid and Donald Trump's trade war.
Ms Reeves is already facing a struggle to balance the books and ramp up defence spending amid the Ukraine crisis, with the Spring Statement due on March 26.
The Tories branded the government a “growth killer” following the gloomy figures.
With tax rises coming into force in April, concerns remain that economic growth will remain sluggish for sometime.
Businesses have warned that paying more in National Insurance, along with minimum wages rising and business rates relief being reduced, could affect the economy's ability to grow, with employers expecting to have less cash to give pay rises and create new jobs.
In addition, firms are facing new uncertainty surrounding the tariffs being imposed by the US President Donald Trump, while the government is also under pressure to increase defence spending.
Ms Reeves blamed wider global economic turbulence for the lacklustre figures.
“The world has changed and across the globe we are feeling the consequences,” she said.
Asked during a visit to Scotland this morning whether Mr Trump's tariffs attacks were hampering growth, Ms Reeves said: “I believe, this Government believes, in free and open trade, and will continue to make that point.
“We are in negotiations at the moment for an economic agreement with the United States to try and ensure that British exporters are supported to export all around the world, including to the United States, and to ensure that they don't push up prices for UK consumers with more tariffs.”
The government is expected to set out significant cuts to the welfare budget next week, as part of these cost savings.
ONS Director of Economic Statistics Liz McKeown said: “The economy shrank a little in January but grew in the latest three months as a whole, with the overall picture continuing to be of weak growth.
“The fall in January was driven by a notable slowdown in manufacturing, with oil and gas extraction and construction also having weak months.
“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”
Last month, the Bank of England halved its growth forecast for the UK this year. At the Spring Statement later this month, the independent forecaster the Office for Budget Responsibility is also likely to downgrade its growth prediction.
This has led to expectations that government spending will have to be reined in so that Ms Reeves can meet her tax and spending rules.
Shadow chancellor Mel Stride urged Ms Reeves to “think again” before the Spring Statement.
“It is no surprise that growth is down again, following near no growth in the last three months of 2024,” he said.
“After consistently talking Britain down, raising taxes to record highs and crushing business with their extreme employment legislation this government is a growth killer..
“Labour inherited the fastest growing economy in the G7 but since they arrived business confidence has collapsed and jobs are being lost.”
Julian Jessop, Economics Fellow at the Institute of Economic Affairs, said: "The latest official data are perhaps not as bad as they look, but they do confirm that the UK economy made a poor start to 2025.
"Nonetheless, this feeble rate would remain well short of the numbers baked into the OBR’s forecasts for last October’s Budget.
“And this is even before the main measures actually kick in next month.
"In short, the economy is on a knife edge, and the Chancellor could be about to tip the UK into a full-blown recession."
Nicholas Hyett, Investment Manager at Wealth Club, warned of the risk that “recession starts here”.
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“Tariffs and increased labour costs were more worries than reality in January, the month covered by these numbers,” he said.
“Those worries will soon be transforming into realities. That leaves plenty of room for economic growth to deteriorate further, with far fewer catalysts to spark an economic recovery. We could be at the start of a long slow slide into recession.”