What US Tariffs Mean for Small and Medium Businesses in the UK

Donald Trump was inaugurated as the 47th President of the United States of America a little over four months ago, on 20th January 2025. However, in that time the Trump administration’s policies towards foreign trade have sent shockwaves throughout the global economy.

The biggest driver of these shocks has been wide-ranging tariffs on goods imported into the US. This has been exacerbated by the inconsistent and unpredictable manner in which they have been applied.

If you’re a UK business that sells goods or services into the US you’ve probably already felt the effects of this turbulence, but what does it mean for you in the longer term—and what can you do to mitigate the effects?

What are tariffs and how do they work?

Tariffs are taxes imposed by a government on imported goods, typically with the aim of making foreign products more expensive, giving domestic industries a competitive edge. For UK SMEs, this means that when the US applies tariffs to goods imported from the UK, those products become more costly for American buyers.

Tariffs are calculated as a percentage of the product’s value, and are usually paid by the importer—so in this case, US businesses. However, the knock-on effect is that UK exporters may see a drop in demand if their goods become too expensive or less attractive compared to domestic alternatives.

In practice, tariffs can reduce profit margins, delay shipments due to increased customs checks and require more complex paperwork. They can also create uncertainty around pricing and long-term contracts.

The UK-US tariffs deal explained

At the start of May the UK and US announced a new deal over tariffs on UK imports into the US. Although President Trump’s blanket 10% tariff on imports still applies to most British goods, there were some carve-outs, including the scrapping of the 25% tariff levied on British steel and aluminium imports—although a quota on the “most favoured nation rates for UK steel and aluminium and certain derivative steel and aluminium products” will be in place, the details of which are currently unclear. The UK exports around £700m of steel and aluminium to the US each year,

A planned additional 25% import tax on British-made cars—which would’ve been on top of the existing 2.5% tariff—was also reduced to 10% for a maximum of 100,000 units (the number of cars the UK exported to the US in 2024). However, any cars exported above the quote will be subject to the 27.5% import tax. Cars represent the biggest UK export to the US, valued at approximately £9bn per year.

Additional government support for UK businesses

In a bid to support British businesses hit by the US tariffs, the UK government has opened access to a multi-billion pound increase in financing opportunities.

The UK Export Finance (UKEF) has been given the power to expand financing support for British businesses by £20bn, with small businesses able to access loans of up to £2m via the British Business Bank’s Growth Guarantee Scheme. The scheme provides lenders with a 70% government-backed guarantee against loans given to smaller businesses that would otherwise struggle to obtain financing.

“As a business owner, what do I need to do?”

Although the US import tariffs could significantly impact your business if you sell a lot of products into the US market, you don’t have to proactively do anything. The tax is paid by your US customers, not you, which means there’s no additional paperwork or tax admin for you to do.

However, if the US market is a big part of your business, you will have to consider your pricing strategy. If US customers are unwilling to accept a 10% (or larger) bump in the cost of your product, you’ll have to consider whether or not you’re willing to absorb this cost yourself.

How can we help?

In uncertain economic times, the best remedy is to do as much as you can to prepare your own finances, and this is where the experienced team at Warr & Co excel.

We have decades of combined experience in helping SMEs to make the most of their money by providing a full suite of accounting services for a monthly fee, or a tailored programme of services designed for what you need most.

To find out more about how we can help you navigate choppy economic waters, get in touch with our experts today, or book a free consultation.