What does Trump’s tariff risk mean for UK SMEs?

In his latest headline-making move, Trump has threatened to introduce new tariffs on eight European countries, including the UK, unless they support his wishes to buy Greenland. 

If no deal is reached, the proposed tariffs on UK goods could start at 10% from 1 February, rising to 25% later in the year.

While the UK government wants to avoid a trade war, the threat alone has already caused stock prices to falter across the globe. And it’s sure to create further uncertainty for businesses that have a significant American market or rely on supply chains connected to the US.

How tariffs work and what’s at stake

Tariffs are taxes added to imported goods, typically as a percentage of the sale price. While US firms technically pay them, the cost is often passed back down the supply chain, affecting UK exporters. The sectors most at risk of tariffs include machinery, automotive, aerospace, and food and drink products such as whisky. 

You might recall similar news last April, when Trump caused stock market chaos by imposing similar levies. China retaliated by slapping US exports with its own tariffs, causing a chain reaction of widespread economic volatility.

Generally, tariff increases are not positive for the global stock market, as they have ripple effects such as higher prices for consumers and stalling the flow of trade. Even SMEs that don’t export directly to the US could be affected if suppliers or partners face higher costs or reduced demand. 

While the announcement is still fresh, it’s been met with concern. Danni Hewson, AJ Bell’s Head of Financial Analysis, told The Guardian, “The fact US markets are closed for a public holiday means we’re only seeing half the picture today.”

“Uncertainty is the biggest dampener on sentiment, and the timing of the IMF’s latest forecast could be seen as ironic. It may have been forecasting better global growth for 2026 following tariff negotiations and AI gains, but those negotiations might as well never have taken place if they can be ripped up so easily.”

How UK businesses can respond

For now, the UK government is seeking to avoid getting into a tariff war with Trump and has made no immediate moves to impose retaliatory tariffs.

However, if the stock market’s immediate response is anything to go by, businesses might be about to face the ripple effects of market instability. 

In the face of uncertainty, small businesses can still take practical steps to prepare for impact and minimise disruption to profit margins. It could be wise to review how much of your revenue relies on direct US trade. You might check this by speaking with suppliers and distributors, and building flexibility into pricing, stock, or contracts. That said, it’s too early to start restructuring supply chains or raising prices just yet.

There are sure to be more details in the days to come, so the best next step may be to monitor developments closely before making any sudden movements. Stay informed by keeping tabs on updates from the government, as well as EU negotiations, or industry-specific trade bodies.