Tariff uncertainty: How UK small businesses can take back control

Tariffs aren’t new. Countries have been using them for centuries to control trade, protect homegrown industries, and collect revenue. But over the past few months, tariffs have been pushed to the top of the news agenda, largely thanks to U.S. President Donald Trump and his economic strategy.

So, what exactly are tariffs, how do they work, and what can you do to protect your business from their effects?

What is a tariff?

A tariff is, at its core, a tax on goods crossing borders. When a product is imported into a country, the government may charge an extra fee — the tariff — on top of its original cost. Tariffs can apply to raw materials, parts, or finished products, and the amount varies depending on the type of good and where it’s coming from.

For example, if your business imports furniture components from China and a 15% tariff applies, you’ll need to pay an extra 15% on top of the original price. On the other hand, if you export UK-made products to China, your customers there might have to pay a tariff at the border, which could make your goods more expensive and harder to sell compared to local alternatives.

The goal of tariffs is usually to make foreign products more expensive than local ones, encouraging consumers to buy — and businesses to sell — local instead.

Why tariffs matter to small businesses

While big companies often grab the headlines when it comes to trade disputes, tariffs can quietly (and sometimes suddenly) affect smaller businesses – even if you don't directly import or export goods.

Here are some of the main ways tariffs could hit your business:

1. Increased costs for imported goods: If you rely on overseas suppliers for products, raw materials, or components, tariffs will usually make those items more expensive. That extra cost can squeeze profit margins.

2. Higher prices for everyday items: Even if you don’t import anything yourself, your suppliers might. If their costs go up, there’s a good chance they’ll pass those increases down the chain. Over time, tariffs can make common business expenses more expensive.

3. Supply chain disruption: When new tariffs are introduced, businesses often need to rethink where and how they source their goods. That process can cause delays, stock shortages, or the need to renegotiate contracts.

4. Reduced competitiveness abroad: If you export goods and other countries impose tariffs on UK products, your items could become more expensive for international customers. This would likely make it harder to compete against local or tariff-free alternatives.

How can UK SMEs manage the impact of tariffs?

While you can’t control international politics, there are steps you can take to protect your business.

• Strengthen your financial safety net: Tariffs can lead to sudden price hikes and cash flow pressures, so it’s wise to make sure your finances are in order. A business savings account can help you build a cash buffer for unexpected costs, while a business credit card could give you short-term flexibility to manage higher expenses.

• Review your supply chain: Understanding where your goods come from is the first step. Could you source materials from a country with a more favourable trade deal? Could you find UK-based alternatives? Even small adjustments can reduce your exposure to tariffs.

• Build flexibility into your pricing: If your supply chain is exposed to tariff-related risks, consider adjusting your pricing strategy to allow for cost changes. You could also consider clauses in contracts that allow you to share the burden if tariffs push prices higher.

• Keep an eye on trade news: Tariffs can change quickly, especially when political relationships shift. Staying informed through trade bodies, government updates, and trusted news sources can help you avoid nasty surprises.

• Explore support schemes: The UK government recently expanded financial support to help businesses navigate global trade shifts, including the pressures tariffs can create. Through UK Export Finance (UKEF), an extra £20 billion in backing is now available to support UK exporters. In addition, small businesses can apply for loans of up to £2 million through the British Business Bank’s Growth Guarantee Scheme.

The bottom line

A new tariff can make the products you rely on more expensive overnight. It can force you to change suppliers, raise prices, or maybe even rethink your offering altogether. And, while you can’t prevent tariffs from being introduced, you can prepare for them.

Staying financially prepared is just as important as staying informed. Whether that’s by reviewing your supply chain, securing flexible financing, or having finance in place so you can cover any unexpected costs, proactive planning can help your business handle whatever changes tariffs might bring.