With the New Tariffs SMEs May Face Supply Chain Disruptions, Rising Costs, and Export Barriers—Here’s How to Respond.
U.S. Tariffs Are Back on the Agenda and have become effective, at least for now.
This has sparked trade tensions to heat up again—this time with (potentially) serious consequences for SMEs in the UK, Europe and the U.S.
The return of the US aggressive trade agenda is now confirmed and the US have started to collect on their imports. Analysts expect the implementation of new tariffs on EU and UK imports, including autos, aerospace components, luxury foods, and more.
Let’s see what this may mean.
These tariffs could reach as high as 25% on key categories such as steel, semiconductors, and agricultural products.
Likewise, any retaliatory duties from the EU and UK would be likely to hit U.S. exports such as bourbon, fashion, and dairy goods. The EU has already proposed new tariffs worth $28 billion in response to the renewed steel and aluminum duties initiated by the U.S.
But this isn’t 2018 anymore—SMEs are already stretched thin from inflation, interest rate hikes, and labour shortages, as we already identified on multiple occasions, so a trade war may not be the answer. And we have just seen Europe hinting at their will to negotiate rather than retaliate. We can only hope on the same intelligence and willingness on the other side of the ocean.
What’s at Stake: The Risks for UK and U.S. SMEs
1. UK SMEs: Caught in the Crossfire
UK exporters are especially vulnerable in a post-Brexit UK. We are faced with a new wave of U.S. tariffs, with three sectors at high risk:
- Automotive & Aerospace: The UK auto sector—heavily reliant on exports to the U.S.—could see up to 25,000 jobs at risk if tariffs hit. Jaguar Land Rover, for instance, exports tens of thousands of vehicles to the U.S. annually. With the Solihull plant already under pressure, a 25% tariff could devastate the region.
- Food & Drink: Premium exports like Scotch whisky, cheeses, and meats face a rerun of 2019, when tariffs slashed sales by hundreds of millions. If reimposed, these could wipe out $500 million+ in revenue for UK producers.
- Tech & Pharma: UK firms sourcing semiconductors from the U.S. or exporting sensitive and high-precision tech components may see input costs jump 15–20%.
Although this is not ideal, it will be confirmed and it may happen. Should the tariffs be scrapped last minute or in a year, it is important for SMEs to invest into diversify their export footprint.
There are important markets that are just as wide and attractive in Southeast Asia or Latin America.
2. U.S. SMEs: Short-Term Wins, Long-Term Risk
While U.S. producers may initially benefit from reshoring and import substitution, the broader picture is more complex:
- Manufacturing Bump? Short-Term Optics, Long-Term Reality Check
Some U.S. SMEs—especially in steel, auto parts, and electronics—may see a short-term uplift as tariffs make foreign imports less competitive. But any gains will likely be uneven, delayed, and largely captured by a handful of dominant players rather than widely shared across the SME sector.
Reshoring sounds attractive on paper, but tight labour markets, high energy costs, and outdated infrastructure make large-scale domestic manufacturing expansion difficult in the near term. Even with federal incentives, scaling production is likely to take time (possibly years).
And then there’s the risk of corporate consolidation. As demand shifts rapidly, large players with automation, capital reserves, and lobbying access are better positioned to absorb growth—much like Amazon’s dominance during the e-commerce boom or Covid-19. This risks marginalising smaller producers and driving wage suppression in outsourced or subcontracted labour markets. - Additionally, high inflation in non-durable goods—such as food, clothing, and fuel—continues to strain household budgets. This reduces the real purchasing power of consumers and dampens demand for domestically produced goods, even if those goods are made more “competitive” through tariffs.
In short: The manufacturing bump may not trickle down, as it unfortunately didn’t when the UK experimented with it! - Export Exposure: EU and UK retaliatory tariffs are likely to target iconic American exports—bourbon, jeans, motorbikes, dairy, and craft goods. American whiskey alone could face a 50% tariff if the EU follows through on its latest threat.
- Supply Chain Friction: Even “beneficiary” sectors like semiconductors and EVs (Electric Vehicles) still rely on global inputs. Disrupted trade flows will create new bottlenecks—especially for SMEs lacking procurement leverage.
What does this mean? Certainly, many SMEs will need to look for new partnerships, be prepared to merge or invest in scaling.
Worst-Case Trade War Impact: A Sector-by-Sector Breakdown
| Sector | UK SME Risk | U.S. SME Risk |
|---|---|---|
| Autos | 25–30% of parts suppliers at risk of closure | Short-term demand boost, but labour & parts shortages |
| Aerospace | Airbus supply delays = cash flow crises | Boeing gains, but SMEs in parts supply may be left behind. |
| Food & Drink | Scotch, cheese, meats priced out of U.S. market. | Farmers and distillers lose key EU/UK customers |
| Tech | U.S.-made chips, components become expensive. | Reshoring remains partial; global dependencies persist or, investments on corporate consolidations. |
3 Urgent Steps SMEs Must Take Now
If things remain as they seem to be now, it may be very wise to:
1. Audit Your Exposure
- UK SMEs: Identify U.S.-sourced inputs—especially tech components, chemicals, and machinery.
- U.S. SMEs: Map EU/UK revenue streams. How much of your top line could vanish if tariffs return?
Use our downloadable Tariff Risk Checklist to assess exposure and risks.
- Shift sourcing to non-target markets such as Mexico, Vietnam, or India. Not only do these regions offer tariff insulation, but many also benefit from existing U.S. and UK trade agreements.
- UK SMEs should consider stockpiling key U.S. inputs before duties rise.
We have often talked about diversification in our many articles, and this is the time to do it. It can be a good survival strategy.
- UK SMEs should start investing on figures that will become quite precious such as specialists and experts aware of lobbying for compensation, similar to post-Brexit support packages.
- U.S. SMEs should explore subsidies under the CHIPS and Science Act, Inflation Reduction Act, and Export-Import Bank guarantees.
Staying politically informed matters. Many aid programs are underutilised simply because SMEs aren’t aware they exist.
Turning Crisis into Opportunity
Despite the challenges, strategic SMEs can find silver linings:
- Export Diversification: Expanding into the Gulf, Southeast Asia, and Latin America can offset losses in the U.S./EU corridors.
- Domestic Incentives: Reshoring programs in both countries offer tax breaks, grants, and subsidies for eligible industries.
- Brand Positioning: British luxury goods and American craft exports remain highly desirable globally—tariffs don’t erase demand, only access. Smart brands will find new routes.
Final Word: Prepare Now or Pay Later
As protectionist policies gain political traction in both the U.S. and Europe, SMEs must assume disruption is coming.
The cost of inaction will be high. But those who plan—auditing their exposure, diversifying early, and accessing support—will emerge stronger.
Register for Our Webinar: “Reshoring in a Challenging Trade Economy”
About NorthStar Consulting
We help UK and U.S. SMEs mitigate global trade risks and seize cross-border growth opportunities.
Whether you’re adjusting your supply chain or entering new markets, our international trade advisors offer strategic, sector-specific support.
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