Trump’s tariffs – implications for UK SMEs in 2025

On 2 April 2025 US president Donald Trump, enacted tariffs that could have introduced significant challenges for UK small and medium -sized enterprises (SMEs). These measures include a universal 10% tariff on all imports into the US, with higher reciprocal tariffs, ranging from 11% to 50% targeting countries with substantial trade deficits with the US including the UK.

Trump has since announced a three month pause on all the reciprocal tariffs for all countries except  China.  All other countries that were subjected to reciprocal tariff rates will see rates go back down to the universal 10% rate. This article will outline some possible strategies to mitigate the potential effect of higher costs.

Impact on UK SMEs

UK SMEs may find themselves particularly vulnerable. The possible new tariffs have direct and indirect implications.

Increased export costs

SMEs exporting products directly to the US market, are likely to experience rising operational costs. This increased financial burden will make the price of British goods less competitive compared with domestic US products.

Industries such as the automotive, food and beverage, consumer goods and niche artisan sectors are likely to bear the brunt, given their current reliance exporting to the US.

Supply chain disruptions

UK SMEs that import raw materials such as steel, aluminium and other essential manufacturing components may also face significantly higher costs.

The imposition of tariffs on imported raw materials would have a ripple effect, inflating production expenses and ultimately resulting in higher prices for UK consumers.

Uncertainty and reduced investment

Perhaps the most challenging factor to quantify, yet arguably the most damaging is uncertainty. SMEs thrive in stable, predictable environments. The reintroduction of tariffs has already dampened business confidence across the UK. The Lloyds Bank Business Barometer report recorded a sharp 10 point decline in business confidence in April 2025, directly attributed to tariff concerns and subsequent market uncertainties.

Reduced confidence often translates into delayed investment, hiring freezes and slower economic growth.

Broader economic consequences

The tariffs are likely to contribute to a broader economic slowdown in the UK.  The EY Item Club has revised UK GDP growth forecasts for 2025 down to 0.8%, citing the global tariff war as a significant factor.

Strategies for mitigation

UK SMEs may have to adopt proactive strategies to mitigate the potential damage from US tariffs:

Market diversification

Diversifying into export markets beyond the US, could help to reduce reliance on any single trade partner.  Europe, Asia and other emerging markets present viable alternatives where demand for quality British products remains strong.

Supply chain flexibility

Businesses may be able to mitigate impact by seeking alternative suppliers from countries less affected by the new tariff regime. Building flexible supply chains helps SMEs respond swiftly to changing trade policies and global economic conditions.

Product innovation and differentiation

SMEs might consider pivoting towards products less susceptible to tariffs or innovating their current offerings to add value and justify higher consumer pricing.

Financial planning and advocacy

Careful financial forecasting, coupled with advocacy through industry associations to lobby for fairer trade terms can help businesses navigate the complex tariff landscape more effectively.

Conclusion

The possible introduction of US tariffs under President Trump presents significant challenges for UK SMEs, impacting profitability and market access. By adapting strategies and seeking new opportunities, SMEs may be able to mitigate some of the adverse effects and navigate this complex trade environment.