UK PMI hits multi-month low, central bank issues urgent warning: trade war still looming despite tariff concessions

Bank of England Governor Andrew Bailey recently issued a warning: despite the UK benefiting from tariff preferences in the US-led trade war, the negative impact of global economic fragmentation will still have a significant impact on the UK economy. This statement is reflected in the latest economic data - the US imposition of global tariffs has led to the largest contraction in private sector activity in the UK in over two years. In a public speech at the Institute of International Finance in Washington, Bailey acknowledged that the current tariff level in the UK (10%) is lower than in other countries, but as one of the most open economies in the world, the UK cannot stand alone. "This is not just a US-UK bilateral issue, but also an issue of interaction between the US and the whole world," he emphasized. "The risks of global economic fragmentation triggered by trade wars need to be addressed as a top priority." The Bank of England is set to announce its interest rate decision on May 8, with the market generally expecting a 25 basis point cut to 4.25%. Monetary Policy Committee member Megan Greene previously pointed out that while tariffs raise import costs, they also suppress inflationary pressures. It is worth noting that the UK's composite Purchasing Managers' Index (PMI) for April fell to 48.2, down from 51.5 the previous month, its lowest level since November 2022. Specifically, the manufacturing PMI dropped from 44.9 in March to 44.0, hitting a new low in almost 20 months; the services PMI also declined from 52.5 to 48.9, the lowest since early 2021. Both key indicators indicate that the UK manufacturing and services sectors are facing serious challenges. The report explicitly points out that the current 145% punitive tariffs imposed by the US on China (the UK has similar tariffs at 10%, but automobiles and steel products still face a 25% rate) have caused global trade uncertainty, leading to a stagnation in business investment sentiment. In addition, the International Monetary Fund (IMF) released its World Economic Outlook report this week, listing the UK's downward revision of economic growth expectations as the highest in Europe. The organization warned that if the US maintains its current tariff policy, the probability of global economic recession will significantly increase. While Bailey criticizes the Trump administration's trade policies, he agrees with US Treasury Secretary Janet Yellen's criticism of multilateral institutions "straying from their mission." "The International Monetary Fund and the World Bank do need to return to their core functions," Bailey echoed US doubts about international organizations' excessive involvement in climate and gender issues. However, he also emphasized, "Central banks must maintain diversity, which is the foundation of the legitimacy of institutions." In response to the recent intense volatility in global markets, this central bank chief stated that although the fluctuations have been "beyond normal," market mechanisms are still functioning effectively, and the Bank of England will evaluate the potential impact of relevant policies once the situation stabilizes.