In 2025, President Trump has reintroduced tariffs to “bring industry back to America,” including a blanket 10% import tariff and steeper duties on Chinese and EU goods. Though no longer in the EU, the UK hasn’t been spared — exports to the US, especially in pharmaceuticals, electronics, and automotive sectors, now face higher costs. For UK SMEs with U.S. exposure, it’s a critical time to reassess strategy.
What’s Changed in U.S. Trade Policy?
- A universal 10% import tariff has been implemented.
- High-impact UK sectors include pharma, semiconductors, automotive, and steel.
- Although UK-US trade talks have restarted, no deal or exemptions have been secured.
What is the impact on the UK Economy?
Several macroeconomic signals have been flagged:
- Growth outlooks are being revised downward. UK think tanks and investment banks now project that UK GDP growth could be halved in 2025 if trade frictions continue to escalate.
- Business investment confidence is softening, particularly in manufacturing and export-orientated services
- Inflationary risks have re-emerged as a result of higher import costs, particularly in sectors reliant on US components or facing knock-on effects from global supply chain reconfigurations.
While consumer demand has remained strong so far in 2025 – with spending rising modestly in Q1 – this is likely to shift if price increases are sustained and interest rates remain elevated.
Currency Movements: A Double-Edged Sword
The British pound has strengthened notably against the US dollar, reaching a six-month high of approximately $1.3250 as of April 15 2025. This appreciation is driven by a combination of factors, including:
- Weakening of the US dollar amid global trade tensions and concerns over US economic policies
- Renewed optimism surrounding UK-US trade negotiations, which has bolstered investor confidence in the pound.
While a stronger pound can reduce the cost of imports for UK businesses, it also makes UK exports more expensive for US buyers, potentially dampening demand. This currency shift adds another layer of complexity for UK exporters already grappling with new tariffs.
Who is most affected?
- Advanced Manufacturing & Automotive
- Tariffs on UK-made car parts and vehicles shipped to the US are decreasing margins
- Major manufacturers are rethinking UK-based production geared for transatlantic markets
- Pharmaceuticals & Life Sciences
- One of the UK’s strongest export sectors is now exposed to significant cost increases in the US market
- Some companies are exploring US-based licensing partnerships to bypass the tariff wall
- Electronics & Semiconductors
- UK firms in this sector face higher US tariffs, but also indirect impact from US-China decoupling, which is disrupting the global component supply
- Financial & Professional Services
- Though not directly affected by tariffs, uncertainty in cross-border investment and shifting global capital flows are leading to delayed transactions and deal-making caution
What should UK Businesses be doing?
With global trade flows shifting fast, here are five practical actions your business should consider:
- Reassess supply chains
- Map critical inputs and export routes
- Identify exposure to US, China and EU trade frictions
- Start sourcing diversification if needed, particularly for tariff-affected sectors
- Rethink US Strategy
- Consider whether setting up a US subsidiary or JV may mitigate tariff exposure
- Re-evaluate your pricing and margin assumptions for the US market
- Watch trade negotiations closely
- A UK-US trade deal may offer partial relief, but timelines remain uncertain
- Engage with trade bodies and policy forums – influence is most valuable early
- Strengthen cost control and working capital
- Inflation and supply chain pressures may squeeze cash flows
- Focus on cost efficiency, lean operations and renegotiating supplier terms
- Build strategic resilience
- Explore market diversification in the EU, Middle East and Commonwealth nations
- Use this opportunity to re-benchmark your risk management, treasury and FX policies
Corporate Finance Implications
In the current environment, dealmakers, investors and business owners should:
- Be cautious on valuation assumptions for export-led businesses
- Factor geopolitical risk into due diligence and scenario models
- Consider that tariffs may depress EBITDA margins, delay expansion plans and increase the cost of capital, but also present opportunities for domestic consolidators.
Trump’s tariff shift is a reminder that even outside the EU, the UK is deeply exposed to global trade policy. For UK businesses, the choice isn’t just to respond - it’s to adapt, rethink and lead with strategic agility.
Need support navigating this landscape? Our Corporate Finance team is here to help whether you're navigating international trade exposure, or if you’re preparing for investment, sale or acquisition.
About Arnold Hill & Co LLP
Arnold Hill & Co LLP is an accountancy and tax firm who have been delivering tailored accountancy services for over a century. Based in the heart of London, the firm is built on strong, lasting relationships and combine tradition with a forward thinking approach to meet the evolving needs of clients, both across the UK and internationally. The firm advise a range of clients ranging from UHNWI’s, family offices and entrepreneurs to growing businesses and multinational groups.
Asha Moore - Corporate Finance Associate