UK SMEs and the tariff landscape: What do you need to know?

In today’s interconnected global economy, decisions made in one corner of the world can send ripples across oceans, impacting businesses far and wide. The recent wave of new reciprocal tariffs has raised significant concerns for UK small and medium-sized enterprises (SMEs). Yet, amid these challenges, could there lie an opportunity for growth and innovation?

SMEs are vital to the UK economy

Small and medium-sized enterprises (SMEs) play a crucial role in the UK economy, representing the vast majority of businesses and providing a significant portion of employment opportunities. However, many of these enterprises are already grappling with hurdles such as increases in National Insurance, National Living Wage, accessing finance, navigating regulatory requirements, and dealing with the uncertainties brought about by Brexit. While the spotlight often shines on the implications for multinational corporations, it’s crucial to recognise that these tariffs can also have profound effects on SMEs.

What is a tariff?

A tariff is a tax imposed by a government on imported goods. It’s designed to make foreign products more expensive, thereby encouraging people to buy domestically produced goods. 

Understanding the current tariff situation

As of 2025, there has been a number of reciprocal tariffs introduced that vary significantly, ranging from 10% to 145% and are imposed on a range of products, including steel, aluminium, and various consumer goods. The situation is constantly evolving, with ongoing negotiations and potential changes that could further influence trade dynamics.

The ripple effect on UK SMEs

The impact of these reciprocal tariffs are being particularly felt by those SMEs that export to the US or rely on imported goods from the US. 

Here are some key impacts to consider:

1. Increased costs: An effect of the new tariff includes the rise in costs for SMEs importing goods from the US. Higher tariffs mean businesses will pay more for the same products, which can lead to tough decisions, such as whether to pass on these costs to the customer or absorb the cost to stay competitive but lose some profit margin. 
2. Supply chain disruptions: Some UK SMEs have a global supply chain, which may include the US. The introduction of tariffs can disrupt these networks, leading to delays and increased costs. For instance, if a UK business relies on components manufactured in the US, the added tariffs could make those components very expensive, forcing the business to find alternative suppliers or absorb the costs.
3. Challenges accessing the US market: For UK businesses looking to export to the US, the new tariffs could create barriers to entry. Increased costs may make UK products less competitive in the US market, which can lead to a decline in sales and market share. 
4. Changes in currency value: The uncertainty surrounding tariffs can also lead to fluctuations in currency exchange rates. For UK businesses involved in international trade, these fluctuations can complicate pricing strategies and profit calculations. A weaker pound against the dollar, for example, can exacerbate the impact of tariffs on imported goods.

UK industries most affected by tariffs

Certain sectors in the UK are likely to feel the brunt of these tariffs more than others. Here are a few key industries that may encounter considerable challenges:

• Manufacturing: Businesses in this sector that depend on imported raw materials or components affected by tariffs are likely to see their costs rise. This includes automotive, electronics, and machinery, where tariffs can significantly impact production expenses and overall competitiveness.
• Textiles and apparel: The fashion and textile industry may face hurdles due to tariffs on imported fabrics and finished goods. UK SMEs in this sector might struggle to maintain profit margins while competing against domestic US brands.
• Construction and building materials: Businesses in the construction industry may experience rising costs for imported materials such as steel, lumber, and drywall, putting pressure on project budgets and timelines. Contractors may be forced to reassess their sourcing strategies and project plans to navigate these financial hurdles effectively.

Strategies for navigating the tariffs

Here are several approaches UK businesses can implement to help navigate this evolving landscape:

1. Conduct a risk assessment: Start by evaluating how the new tariffs will affect your operations. This includes assessing supply chains, cost structures, and market access. By identifying potential vulnerabilities, you can take action to address them and seize opportunities for improvement.
2. Diversify supply chains: Consider diversifying your supply chains. By reducing dependence on a single market, you can enhance your resilience to external shocks and explore new markets for growth. For larger firms, Marsh McLennan Companies’ (MMC) AI Sentrisk platform can help identify and assess supply chain vulnerabilities, helping businesses make informed decisions and strategies to mitigate the impact of tariffs and other disruptions.
3. Review pricing strategies: This could involve adjusting prices to reflect higher costs or finding ways to improve operational efficiency to maintain margins. Transparent communication with customers about the reasons for price changes can help maintain trust and loyalty.
4. Embrace innovation: Is there an opportunity to leverage technology and innovation to streamline operations and reduce costs? For example, investing in digital marketing and e-commerce may help you reach new customers and improve efficiency, allowing you to adapt to changing market conditions.

Insurance considerations

As businesses face the challenges posed by new tariffs, it’s essential to evaluate if you have the insurance and breadth of coverage you need to safeguard against any potential financial risks. 

Trade credit insurance

Trade credit insurance is like a safety net for your business, protecting you from the worry of customers not paying their invoices. This is especially important when tariffs come into play, as they can lead to increased costs or reduced demand, putting your customers in a tough spot financially. With trade credit insurance, it helps mitigate potential losses by conducting credit checks on new customers and covering a percentage of unpaid invoices, helping to keep your cash flow steady.

Business interruption, stock and goods-in-transit

As sourcing costs rise you may decide to bulk purchase or change supplier and so the value of your stock may change, which means you might need to review your insurance limits. If your supply chains change, don’t forget to revisit your goods-in-transit or marine policies as well. While Business Interruption insurance typically doesn’t cover revenue losses from tariffs, an increase in your products selling price may require BI Revenue declarations to be revisited. Additionally, if you start working with new trading partners, make sure to review the specified customers and suppliers in your BI policy. Lastly, keep in mind that tariffs or changes in supply routes could impact your ability to reinstate operations after a loss, especially if your cash reserves are low. In such cases, it might be wise to consider extending your BI indemnity periods for added security.

Directors and officers (D&O) insurance

If you’re a business owner or director, you have a responsibility to make decisions that protect your business and its stakeholders. In a changing trade environment, the decisions you make regarding tariffs and international trade can have significant implications. D&O insurance protects you and your fellow directors from personal liability in the event of legal claims arising from your business decisions.

Can you reduce the rising costs?

By taking the time to review and renegotiate your insurance renewals, it may help to free up money to assist in managing rising costs. Marsh Commercial can support you with this, assisting in securing competitive rates and broad coverage to help lower your overall risk costs and minimise exposure to uninsured risks. 

Building a resilient future

The new reciprocal tariffs may bring some challenges for UK SMEs, but proactive planning and risk management can help you navigate this changing landscape. 

As a business leader, it’s important to connect with experts who can offer helpful guidance. Whether it’s conducting a risk assessment, looking into insurance options, or diversifying your supply chains, taking action now can really help protect your business from any uncertainties ahead.

If you’d like to discuss how we can assist you in preparing for the impact of the new tariffs and potentially save you money on your insurance premiums, please get in touch with us today. Together, we can develop a tailored strategy to protect your interests and position your business for success in a challenging environment.

For a deeper look into the impact of the new tariffs, you can watch our webinar replay of “All things tariff related — strategies for effective risk management”.