By Rashmi Pandya, FCCA
Recent comments from US President Donald Trump about imposing new tariffs sent ripples through the global market and raised concerns for many businesses trading internationally.
While these proposed tariffs have now been called off, they did serve as a reminder of just how quickly trade conditions can change and why your business needs to prepare for future uncertainty.
Businesses should treat this as a learning opportunity to assess how at risk they are to international trade changes and put a clear plan in place.
What were the proposed tariffs?
Donald Trump indicated that the US could impose tariffs on goods from eight European countries, including the UK, unless they support his wishes to buy Greenland.
Had the deal gone ahead, UK goods exported to the US could have faced an initial tariff of 10 per cent from 1 February and potentially rise to 25 per cent later in the year.
Tariffs are taxes placed on imported goods and are usually calculated as a percentage of the sale price.
Although they are technically levied on US firms importing foreign goods, the additional costs are often passed back through the supply chain and impact exporters.
The US has since announced that it is exploring a potential deal and stepped back from its tariff proposals.
However, this situation shows just how much political disagreements can turn into a commercial risk.
Who could have been affected by the tariff charges?
If the tariffs had been introduced, businesses importing from or exporting to the US would have felt the most immediate impact.
Even if you do not trade directly with the US, you could still feel the effects through increased costs, disrupted global supply chains and reduced demand from international partners.
The BCC Insights Unit surveyed businesses’ initial reactions to these proposals and found that one in three UK firms claimed they would be at risk from the proposals for new tariffs.
Of those who claimed they would be affected, a third had already begun taking action in response to the announcement.
What can UK businesses learn from this?
Global markets reacted nervously to Trump’s comments and stock prices faltered globally, showing just how sensitive international trade is to tariff changes.
Even though the changes did not materialise, your business can learn valuable lessons and take proactive steps to prepare for future tariff uncertainty.
Businesses can prepare by:
- Reviewing supply chains and reliance on US trade – Assess how much revenue depends on the US market or on suppliers that could be impacted by future tariffs.
- Speaking to suppliers and customers – Understand where cost pressures may arise and how tariffs could affect pricing and demands.
- Exploring alternative supply routes or suppliers – Diversifying supply chains can reduce the risks of sudden trade disruptions.
- Reviewing pricing structures, contracts and cash flow forecasts – Make sure your business can handle and adapt to potential cost increases.
- Exploring new markets and revenue streams – Reduce your reliance on any single trading relationship to help build resilience.
- Monitoring developments closely – Stay up to date on Government guidance, trade negotiations and global policy changes so you make informed decisions.
Building flexibility in your future contracts and planning for different scenarios can help your business respond more quickly if tariffs are introduced in the future.
How can we support your business?
When you diversify your supply chains and reduce reliance on single markets, you are better positioned to manage unpredictable tariff conditions.
Our expert team can help you understand how global tariff changes could affect your business and international supply chains.
We can help assess the potential risks to your finances and model the impact of tariffs on your margins and cash flow.
With the right support, you can help take away some of the uncertainty in the current trading market.
If you need further advice on how prepare your business for international trading and tariff changes, contact our team today.