UK SMEs cite trade tariff disputes as their biggest challenge

More than one in five UK small and medium-sized enterprises say ongoing global trade tariff disputes now represent the greatest challenge to their business, according to new research from Paragon Bank.

The survey of 1,000 SMEs found that 21% view tariff wars as their most significant current pressure point, nearly a year after the US announced a new wave of global tariffs and amid continuing geopolitical tensions. Respondents cited rising import costs, supply chain disruption and shrinking profit margins as the key ways tariffs are affecting their operations.

Some sectors reported even higher levels of exposure. More than a third (36%) of firms in transportation and storage identified tariffs as their primary issue, while 25% of manufacturers said the same.

Businesses reported a range of impacts from the tariff environment, including rising costs of imported goods (30%); supply chain disruption (28%); and increased cost of production (27%).

A quarter of SMEs said their profit margins had been directly squeezed, and 23% reported either reduced access to export markets or lower demand from international buyers. Other issues included planning uncertainty (22%), increased production times (20%) and reduced sales (17%).

The latest round of trade tensions follows a series of tariffs introduced by the United States in April 2025, escalating the long-running US-China trade dispute and prompting retaliatory measures across global markets. UK SMEs, particularly those dependent on cross-border supply chains, are continuing to feel the effects.

Phil Hughes, Deputy Managing Director of SME Lending at Paragon Bank, said the disruption extends beyond firms directly involved in international commerce.

“Trade tariff disputes have created significant challenges for SMEs, not only those directly involved in import and export markets, but also businesses further down the supply chain,” he said. He added that uncertainty around future tariff policy “has made planning and decision-making increasingly difficult”, causing some firms to delay investment or scale back growth plans.

With little indication that geopolitical tensions will ease in the near term, many SMEs are reassessing supply chains, renegotiating contracts or seeking alternative suppliers to manage risk. Some firms are also investing in measures to improve resilience against further volatility.

Hughes said SMEs had shown “resilience in absorbing these rising costs” but questioned how long that could continue. He noted that Paragon, which lends to more than 16,000 UK SMEs, is seeing increased demand for financial support as businesses adapt to the unsettled global trading environment.