On one hand, automotive tariffs have been slashed from 27.5% to 10%, a clear win for British exporters. On the other hand, uncertainty remains around a broader UK-US Economic Prosperity Deal which would remove tariffs on steel and aluminium and reduce others. With a July 9th deadline looming, the UK risks facing a dramatic hike in tariffs if the agreement falls through.

Despite these headwinds, optimism among UK businesses hasn’t disappeared. In fact, recent data shows that 72% of internationally active SMEs still expect growth, and nearly a quarter are reshoring services to build resilience.

It’s clear that, while uncertainty looms, the businesses that innovate now are best placed to thrive later. This article will explore how UK SMEs can turn disruption into opportunity by innovating, entering new markets, and leveraging incentives to stay competitive. 

The ripple effects of trade disruption go beyond exporters

The UK’s small business community might assume these issues affect only exporters, but that’s a dangerous misconception. The US is a critical market for UK firms, with 59% of SME exporters citing it as a key destination. For companies already operating on thin margins, the reintroduction of tariffs, even at a 10% increase, can squeeze profitability, delay orders, and drive down customer demand.

The impact doesn’t stop there. Even SMEs that don’t export may still rely on suppliers who do, leaving them exposed to the same trade pressures. Exchange rate volatility following tariff announcements, as noted by Oxford Economics, can raise the cost of importing essential goods. This, in turn, leads to higher inflation, wage pressure, and operational strain.

Tariff battles also create unpredictable retaliatory action. As the US imposes duties, other nations respond in kind. Canada, Mexico, and China have all announced or enacted counter-tariffs, potentially leading to wider economic drag. The Office for Budget Responsibility has warned that such trade shocks could wipe a full percentage point off UK economic growth – a worrying prospect for firms dependent on steady demand. 

Why agility gives SMEs the edge

Larger companies may have the scale to absorb shocks, but SMEs have the advantage of speed. In a volatile environment, the ability to pivot quickly is a strategic asset, and many SMEs are already showing what agility looks like in practice. Nearly a quarter of internationally active UK businesses are reshoring operations to reduce dependency on unstable trade routes. Others are rapidly diversifying their supplier base or exploring new overseas markets where trade agreements offer better terms.

SMEs also have leaner hierarchies and shorter decision cycles. That means faster changes to strategy, pricing, procurement, and even product development. In a world where tariff regimes can shift overnight, speed matters.

But agility alone isn’t enough. Strategic innovation, backed by government support, is what can turn disruption into durable growth. 

Opportunity amid global shifts

While headlines focus on trade friction, a more nuanced picture is emerging. In some cases, UK firms may even benefit from shifting sentiment.

With the US applying steep tariffs on imports from China and Mexico, potentially as high as 100%, British exports suddenly look more attractive. A 10% tariff on UK goods is significantly less than what many competitors face. In sectors like manufacturing, automotive, or consumer goods, that pricing edge could open doors.

Investors, too, are watching. If Trump’s trade policy remains in place, foreign firms may choose to relocate production to the UK to gain preferential access to the US market. This could mean new investment, new supply chains, and new demand for UK-based services.

But this window won’t stay open forever. SMEs need to act before domestic or international competitors crowd the space. 

Strategic steps SMEs should take now 

With global trade dynamics in flux, UK SMEs can’t afford to wait and see. Now is the time to act decisively, not only to weather uncertainty, but to position for long-term growth. 

1. Audit your exposure
   First, understand where your risks lie. How much of your revenue or supply chain is tied to the US, China, or other potentially high-tariff markets? Mapping out your dependencies is the first step toward reducing them.
2. Diversify markets
   Relying on one or two international markets is risky in a shifting trade environment. Look into trading relationships with regions covered by newer UK agreements; for instance, opportunities under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
3. Rethink your supply chain
   Whether it’s reshoring, nearshoring, or sourcing from lower-risk regions, agility in procurement will be key. A more resilient, flexible supply chain helps you respond faster when trade rules or tariffs change.
4. Prioritise innovation to build resilience
   Innovation doesn’t just mean creating new products; it includes refining processes, improving efficiency, and solving technical challenges in day-to-day operations. SMEs that focus on incremental innovation are better equipped to adapt and compete.

The UK government supports this kind of activity through R&D tax relief schemes - available not just to tech firms, but any companies experimenting with new materials or streamlining workflows. If your business is solving problems or trying new approaches to improve outcomes, there’s a good chance it qualifies.

5. Use strategic planning
   In times of volatility, stepping back from business-as-usual is essential as change is much easier to manage when it’s anticipated, not reactive. Take time to re-evaluate your entire operation – from forecasting and pricing models through to technology and staffing.  

Closing thoughts

There’s no sugar-coating the uncertainty SMEs face today, but volatility often gives rise to the most transformative businesses. Historically, periods of crisis have seen a spike in patent applications, a surge in challenger brands, and the emergence of new market leaders.

In today’s climate, SMEs that take the time to plan strategically are the ones most likely to emerge stronger. Innovation is no longer a nice-to-have. It’s a critical tool for resilience and for turning today’s global trade shake-up into tomorrow’s competitive advantage.