After Brexit, Covid and Truss’s disastrous budget, the news of potential and actual tariffs imposed by the United States means yet more uncertainty for SME owners. Although American consumers are having to dig deep to pay the spiking prices, tariffs will significantly impact the competitiveness of British goods in a key export market. As the scale and start date of these tariffs can change on a daily basis, SME owners are rightly wondering what proactive steps they can take to protect themselves.
At Swoop, we have always been on the side of SMEs as they navigate the difficult waters of uncertainty, but these tariffs, apparently guided by whims and reaction rather than any clear policy or plan, feel especially daunting. Fortunately, there are some actionable steps your business can take to mitigate the risks and build resilience.
The first line of defence: understand your supply chain
The immediate impact of tariffs is often felt through supply chains. Now is the time to meticulously examine yours:
- Identify all key suppliers and customers involved in your US trade. Understand where your raw materials originate, the journey your products take, and who your end consumers are in the US market.
- Pinpoint which of your products are directly affected by current or potential tariffs. Create a best case / worst case analysis of cost increases and how these will impact your pricing strategy and competitiveness.
- Are there vulnerabilities or single points of failure in your supply chain that could be severely disrupted by tariffs or retaliatory measures? Could increased costs from US tariffs make your products uncompetitive?
- Investigate potential alternative suppliers, both within the UK and in other international markets less susceptible to US tariffs. If you are able to source materials or components closer to home, such diversification can reduce your reliance on potentially volatile supply lines.
Time to explore new markets and opportunities
While the US market remains significant, the current uncertainty highlights the importance of diversifying your customer base:
- Explore opportunities to expand your presence within the UK, especially where you can tap into underserved segments or strengthen your relationships with existing domestic customers.
- The EU remains a substantial trading partner for the UK and there may be positive news about closer ties with our neighbours. Stay up to date with trade agreements – these may point to opportunities for growth within the European single market.
- Markets in Asia, Africa, and South America may offer new avenues for growth. Consider the specific needs and demands of these markets.
- The UK has been actively forging new trade deals. Understand the opportunities existing trade agreements present for your specific sector and explore potential new export destinations.
Long term resilience
One thing is certain about the tariffs: they will change, potentially quickly, especially when American consumers start feeling the pain of higher prices. While you can’t plan for any specific outcome, you can build resilience into your business. Here’s how:
- Don’t wait for the next announcement: plan for multiple scenarios based on different tariff outcomes and potential retaliatory measures. For each scenario, outline impacts on your business and pre-plan your responses.
- Review your operational costs across the board. Identify areas where you can streamline processes, improve efficiency, and reduce overheads to absorb potential tariff-related cost increases. At Swoop, we have a number of ways you can achieve this quickly and easily.
- Consider your pricing strategy in light of tariffs. Can you absorb some of the cost increase, or will you need to pass it on to customers? Explore different pricing models and communicate transparently with your clients.
- In uncertain times, strong customer relationships are invaluable. Focus on providing excellent service, building loyalty, and understanding your customers’ evolving needs. Many businesses will be looking at how they are spending money and cutting costs – so be on the front foot when justifying the value you bring.
- Build your support network so that you’re not alone: consult with trade advisors, customs experts, and financial professionals to understand the implications of tariffs. Your local business community and industry will also be a source of ideas, opportunities and moral support through what looks set to be a testing summer.
How Swoop can help
Challenging times mean that you have to move fast and make informed decisions, especially around your finances. At Swoop, we connect you with a wide range of funding options, from working capital solutions to export finance, that can help you adapt to changing market conditions. Whether you need to invest in exploring new markets, or bolster your cash flow during uncertain times, we can help you find the right financial support.
US tariffs present a challenge, but they also offer an opportunity for UK SMEs to reassess their strategies, diversify their markets and build greater resilience. With the full impact yet to be felt, there is no time to lose: build your plan to see your business through this uncertainty and emerge stronger.
