Tariffs. They’re one of those things that sound boring until they hit your pocket. They may seem like an issue only for big corporations, but small businesses are feeling the effects too. Whether it’s trade tensions between the US and China, or new policies in the UK, the rise of tariffs is a growing concern. So, what exactly are tariffs, and how do they affect small businesses in the UK? Let’s take a closer look.

The tariff situation in the UK

A tariff is a tax imposed on imported goods. Governments use tariffs to protect domestic industries, raise revenue, or respond to trade imbalances. While they might seem like a distant concern, tariffs can significantly impact small businesses that rely on imported products.

For instance, in April 2025, the US imposed a 10% baseline tariff on most UK goods. This move was part of a broader strategy that also included:

• A 25% tariff on all aluminium and steel imports from the UK.
• A 25% tariff on all passenger vehicles and light trucks.​
• A 25% tariff on automobile parts, effective from May 3, 2025.​

These tariffs affect a wide range of UK industries, including automotive, manufacturing, and technology. Goods already subject to steel, aluminium, and automobile duties in the US are exempted from the 10% tariff. However, sectors like copper, pharmaceuticals, semiconductors, timber, energy products, and minerals not available in the US are currently exempt, though tariffs on some of these may be forthcoming.

The ripple effect on small businesses

Large companies can often absorb tariff hikes. They have the resources to negotiate and adjust. Small businesses, on the other hand, don’t have that luxury. Every extra cost hits harder, and that can squeeze their profit margins.

Let’s unpack the potential impacts of tariffs on small businesses by looking at a few examples:

A small boutique importing clothing from China faces increased costs if tariffs rise. The owner must choose between:

• Raising prices to pass on the extra cost to customers, which may drive them away, or
• Absorbing the cost, which reduces the business’s profit margins and could harm cash flow.

Small businesses that have already placed orders might not account for future tariff hikes, leading to unforeseen price increases. This can create cash flow problems when the business needs to pay for goods at a higher price than originally planned, potentially upsetting their financial forecast.

Tariffs can also cause headaches for businesses relying on just-in-time inventory systems:

• Delays at customs due to tariff hikes can disrupt the timing of deliveries, leading to stock shortages during peak demand periods.
• On the other hand, excess stock bought before a tariff hike might not sell at the intended profit margin, tying up working capital.

Tariffs are often subject to sudden changes, making long-term planning difficult:

• A small business might face unexpected tariff increases, such as a sudden 25% hike in steel prices, without prior warning.
• The unpredictability of tariffs means businesses can’t always plan for future costs and must remain agile to adapt.

Managing tariffs comes with an administrative load:

• Small businesses need to track changing tariff rates, adjust pricing strategies, and ensure compliance with regulations.
• This can be overwhelming for businesses with limited administrative support, distracting from more critical tasks like growth and customer service.

As businesses pass on the cost of tariffs, suppliers may push back, and relationships can become strained:

• Disputes over pricing can arise, and delays in production or delivery might occur if suppliers struggle to adjust to the new cost structures.
• This can damage the business’s reputation and harm long-standing supplier relationships.

What you can do to protect yourself

So, what’s a small business to do? The answer isn’t simple, but there are a few strategies that can help.

Diversify suppliers: Relying on a single country for imports can be risky. By sourcing products from multiple countries, businesses can mitigate the impact of tariffs from any one nation.​

Review pricing strategies: Adjusting pricing to account for increased costs can help maintain profit margins. However, businesses must balance price increases with customer expectations and market competition.​

Stay informed: Regularly reviewing trade policies and tariff updates can help businesses anticipate changes and adapt accordingly.​

Consult with experts: Engaging with trade advisors or accountants can provide insights into navigating tariff implications and optimising financial strategies.

Turn uncertainty into opportunity

The global market is unpredictable. But with the right strategies, small businesses can adapt. Tariffs are just one challenge, but they don’t have to be a disaster. With the right support, your business can weather the storm.

If you’re unsure how tariffs are affecting your business or if you want to make sure you’re prepared for the future, get in touch with us.

Ralph, Fiona and the team can help you navigate the complexities of global trade and give you the tools you need to safeguard your financial future.

Reach out by phone on +44 191 456 2425 or via the Contact Us page here on our website. It’s better to prepare now than face the fallout later.

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