Reciprocal trade tariffs will force UK small businesses to quit US market, data shows

One in three small businesses would scale back their US operations if the UK government decided to impose reciprocal tariffs on American goods, new data has shown.

Small importers have warned that reciprocal tariffs on the US market would “wreck” their business plans, according to new research by the Federation of Small Businesses.

The government has just closed a consultation with British businesses to determine the impact of potential taxes on US goods as a response to Donald Trump’s 10% tariffs.

While the results have not yet been published, the FSB warned that reciprocal import fees would significantly impact small traders in the UK.

Around 60% of importers said they would raise prices to cover higher costs, while 13% said they would halt all imports from the US. Meanwhile, 34% said they would absorb the extra costs themselves.

The potential tariffs are also forcing a “major rethink” of import strategies, according to the survey, with one third of businesses claiming they were continuing to import from the US but at lower levels, while four in 10 said they were seeking non-American suppliers for affected products.

In 2023, the US was the UK’s second-largest import partner for goods, according to government data.

Some of the most popular US food & drink products exported to the UK include snack foods, breakfast cereals, fresh vegetables, and alcoholic beverages, such as wine and distilled spirits.

Read more: What does Trump’s tariff showdown mean for UK food and drink?

For those currently exporting to the US, the damage of Trump’s protectionist tariffs is already clear – with 21% saying they had stopped or may stop exporting to the US altogether.

Over a third of small exporters (38%) are already dealing with a falling demand for their goods due to the increase in import costs on the other side of the pond, while 16% have had to cut their range.

S&P Global confirmed the turbulent landscape for exporters last week, revealing that foreign demand for British manufactured goods in the US, China and Europe declined at its sharpest pace since May 2020 – at the height of the Covid-19 pandemic – due to the impact of Trump’s trade war, as well as tax hikes for UK employers.

Importers have “seen the impact on UK SME exporters from US importer clients pausing trade, and do not want to see that duplicated in the UK”, the FSB said.

The group’s policy chair, Tina McKenzie, said the figures confirmed that “tariffs can wreck trading ambitions”.

Read more: What could US import tariffs mean for NI food and drink?

“Tariffs might sound technical, but their impact is painfully real”, she added. “They raise costs, squeeze margins, and make our goods less competitive. For small businesses already navigating tough climates, it’s one blow too many.”

SMEs “do not have armies of trade lawyers or entire departments handling compliance, they usually have one person wearing 10 hats”, McKenzie said.

“So, when new rules drive up the cost of doing business overnight, both the admin burden and financial pressure can force them to pull back.”

The government’s business and trade department is currently in the US in a bid to advance trade talks and potentially strike a deal with the Trump administration.

The FSB has called for greater support for small firms amid trade uncertainty. Although the UK government’s expanded trade finance package allows small businesses to secure loans of up to £2m through the British Business Bank’s Growth Guarantee Scheme, the group warned that “more will need to be done if the UK introduces tariffs on imports”.