UK SMEs caught in the middle of fresh Trump tariff uncertainty

UK businesses may have been relieved by the US Supreme Court’s ruling blocking Trump’s earlier tariffs imposed using emergency powers. However, that relief was short-lived as the President has now used a different legislative route to introduce a new 15% temporary global tariff. 

The move brings with it fresh uncertainty for those countries that had previously settled a 10% tariff arrangement with the US, including the UK. 

For UK small businesses exporting to the US, the higher tariffs could directly affect pricing, margins, and demand. Here’s a simple breakdown of what’s changed and what UK SMEs should be aware of. 

What’s changed — and why clarity matters

Despite the Supreme Court’s ruling against Trump’s initial tariff threats, on Saturday, the President announced that he would use an alternative law, Section 122 of 1974’s Trade Act, to impose a new 10% temporary tariff on goods from all countries entering the US. He then took to social media to announce that he’d be raising that temporary tariff to 15%.

The temporary tariff can last up to 150 days without approval from Congress. However, the impact on existing trade agreements remains unclear. Officials have yet to give a clear answer on whether the previously agreed upon 10% deals still apply.

Business groups, including the British Chambers of Commerce (BCC), have warned that constant policy changes will add to frustration and fatigue among exporters. And current estimates from the BCC place the cost of the higher tariff at £2-3bn on UK goods entering the US, according to the BBC.

The practical risks for SMEs exporting to the US

While the changes only include a potential 5% increase in tariffs, this will have a tangible impact on businesses, especially SMEs with already tight margins.

Typically, tariffs are paid only when goods enter the US. But the impact has wider rippling effects. 

Some businesses exporting to the US will absorb costs to remain in a competitive position, while others may not be in the financial position to do so, instead passing them on to US customers. 

Research suggests a significant portion (between 31% and 63%) of earlier tariff increases were ultimately reflected in higher prices for consumers, which can drive down demand for imported goods.

For SMEs exporting to the US, there are three main risks going forward:

• Tighter margins if US buyers resist price increases and businesses have no choice but to absorb the tariff cost.
• Lower demand if higher prices decrease US orders.
• Supply chain disputes if tariff rates change after contracts are signed, leaving uncertainty over who is responsible for the additional costs between UK exporters and US buyers.

What UK small businesses should do now

First things first, look at how much of your business depends on selling to the US. Work out what an extra 5% tax on your goods would actually cost. If the tariffs wipe out your profit, you may need to raise prices, cut costs, or rethink what you sell where.

Secondly, when you agree to new deals, try to include a clear line that explains what will happen if import taxes go up. Given that there’s so much ongoing uncertainty, this way, everybody knows in advance who is responsible for what.

Third, don’t put all your eggs in the US’s basket. If possible, strengthen networks and markets in other areas, such as the EU or Asia, to lessen the financial impact if US rules change again, which could be likely.

Finally, keep lines of communication open with your US customers, and be transparent. If prices need to rise because of new taxes, explain why. Most buyers take bad news better when it’s clear, honest, and delivered in good time.