UK businesses struggle under US tariff pressure

[EUROPE] UK businesses are increasingly alarmed by the United States' recent tariff policies, which, while targeting Chinese imports, are having significant ripple effects on British companies. From escalating costs to disrupted supply chains, UK firms are urging the government to take decisive action to mitigate the adverse impacts of these trade measures.​

Rising Costs and Supply Chain Disruptions

The UK's manufacturing sector is particularly vulnerable to the US tariffs. A survey by the British Chambers of Commerce (BCC) revealed that nearly two-thirds of manufacturing exporters anticipate being affected by the new tariffs. The direct cost implications are compounded by broader concerns over reduced global demand and supply chain uncertainties.​

In response, many UK businesses are preemptively adjusting their strategies. According to a survey by HSBC, 39% of UK companies are raising prices in anticipation of higher tariffs, while half are shifting their export markets to countries with lower trade barriers.​

Industry leaders have also pointed to increased logistical costs and delays in obtaining critical components as further challenges stemming from the tariffs. Many UK manufacturers source intermediary goods through supply chains that pass through China or the US, and any disruption along this route is impacting production timelines and budget forecasts. Sectors such as automotive, aerospace, and high-tech manufacturing have reported longer lead times and heightened financial uncertainty as they grapple with the new trade environment.

The Confederation of British Industry (CBI) has warned that without a coordinated response, UK firms may find themselves at a competitive disadvantage. "Tariffs that are ostensibly aimed at geopolitical rivals are instead drawing in unintended partners like the UK," said Rain Newton-Smith, Chief Executive of the CBI. She added that businesses are being caught in the crossfire of international disputes, with many unable to pivot quickly enough to avoid losses.

Government's Stance and Strategic Responses

The UK government has expressed disappointment over the US's decision to impose global tariffs on steel and aluminium. Business and Trade Secretary Jonathan Reynolds emphasized the UK's commitment to supporting its industries and is actively negotiating with the US to eliminate additional tariffs and benefit UK businesses.​

In a bid to bolster its steel sector, the UK has unveiled a steel strategy that includes a £2.5 billion investment to maintain the global competitiveness of British steel and address challenges posed by US tariffs on steel imports.​

Recent diplomatic talks between the UK and US have focused on trade rebalancing efforts, with British officials pushing for carve-outs or exemptions for key UK exports. Though no definitive breakthroughs have been announced, government insiders suggest that discussions are progressing behind closed doors. The UK is also exploring expanded trade relations with Asia-Pacific countries and has accelerated talks around the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as a hedge against over-reliance on US trade.

Broader Economic Implications

The ripple effects of the US tariffs are not confined to the manufacturing sector. UK exports could potentially shrink by up to £8.5 billion over two years if a full-scale US-China trade war escalates, according to Allianz Trade.

While the UK does not run a significant trade surplus in goods with the US, the broader economic impact, including potential inflationary pressures and market disruptions, remains a concern for policymakers and businesses alike.​

Economists have also noted that the tariffs could weaken the pound in the medium term, as reduced export competitiveness and trade volume begin to affect the UK’s balance of payments. A weaker currency, while potentially beneficial to some exporters, could drive up import costs for consumers and contribute to inflationary pressure—particularly in energy and food sectors. The Bank of England is reportedly monitoring the situation closely as part of its broader inflation outlook.

Meanwhile, small and medium-sized enterprises (SMEs), which make up the majority of UK exporters, may face the brunt of the economic fallout. Unlike larger corporations, SMEs often lack the resources to quickly adapt to new trade barriers. Several industry associations are calling for targeted support, including financial relief packages and export assistance programs, to help smaller firms weather the evolving trade environment.