They have been headline news almost every day recently – but what do Trump’s tariffs mean to UK businesses?
It may seem that such an international event will have little effect on the UK. But there will be some impact. The problem is understanding just how the landscape will look by the end of the year.
Headlines show a mixed picture following the news that the US would be imposing flat tariffs of 10% on UK businesses. That is for all goods entering the USA from the UK. Vehicle makers will be subject to a 25% tariff.
The original announcement was made on 2 April with immediate effect. But Trump climbed down from that and announced the tariffs would be paused for 90 days for some countries.
Trump says that the tariffs are in response to the amount of levies imposed on US goods by other countries. He claims America has been ‘looted, pillaged and plundered’ by such duties.
The President also believes it will lead to a return of production and manufacturing in the USA which has been offshored. Whether that will be the case remains to be seen.
What are the tariffs?
The new tariffs will come into effect from 1 July for UK exporters. Duties for some countries were immediate. That is because some countries – including the UK – did not impose immediate levies in retaliation. Once implemented for the UK the tariffs will be:
- 10% on all imported foreign goods. Although electronics, computers and smartphones are temporarily exempt.
- 25% tariff on imported vehicles.
- Reciprocal tariffs tailored to selected countries.
- 25% tariff on aluminium and steel imports.
What Trump’s tariffs mean to UK businesses?
Some business leaders say that the levy will weaken demand and disrupt supply chains. The Director-General of the British Chambers of Commerce says, “Economic demand will be weaker as a result.”
Those comments followed soon after Trump’s announcement. But in recent days, response to the pausing of the levies has left some business leaders feeling more optimistic.
The Chief Economist of the Institute of Directors says the overall mood is now more upbeat. She adds that business owners are more likely to invest or hire as a result of the pause in the tariffs.
While your company may not export to the US or to any other country, weaker economic demand is not ideal for any business. And the knock-on effect can reach any supplier to businesses that export to the US.
Who will be hit hardest?
According to the Federation of Small Businesses, around 59% of UK small businesses sell goods to the US. That means it is a key trading partner for the country.
This could mean disruption for key industries, particularly in manufacturing, automotive and other sectors that rely on exports. But any sector could end up being impacted by the new levies. This includes retail, aerospace and pharmaceuticals.
Suppliers to such companies could now face additional costs or a reduction in the size of orders. And none of those scenarios are great for business.
All this is happening at a time when wage costs and NI contributions have risen. This is making the future more challenging for UK businesses.
What can I do if I’m affected by the tariffs?
Businesses affected will need to decide whether to increase prices or absorb costs. With the delay in implementing the levies, business owners who will be impacted should not delay in working out their numbers and planning how to navigate the tariffs.
Some businesses will be able to soften the blow by restructuring, exploring other international markets or seeking business finance. For those businesses heavily dependent on the US, it could be a crippling time.
Getting your company debts and creditors in order is essential. Businesses that are up to date with their cash flow forecasts can plan for any headwinds. Whilst the clock is ticking before the tariffs are introduced, taking time out to assess the situation is always better than a knee jerk reaction.
How can we help?
Running a business is more than just numbers. They are important, of course, but if you have your financial reporting in hand it increases the options you have. The key is not getting caught out.
Contact our team today for more details about how we can help your business plan, whether you trade with the US or not.
