With the almost staggering possibility of US trade tariffs on the horizon, many UK technology businesses may face a range of challenges. The impact will depend on several factors, including the type of technology products which are the subject of US tariffs (if any), supply chain dependencies, and the specific tariffs introduced. As the landscape of international trade continues to shift, it’s important for UK businesses to stay informed and prepared. This article explores some of the most likely headline challenges ahead.
Increased costs of exporting to the US and supply chain disruption
If the US imposes tariffs on specific technology products that UK businesses export to the US (e.g., hardware, software, or electronics), the obvious immediate effect will be an increase in the cost of doing business in the US. UK technology businesses will need to consider either absorbing these higher costs or pass them on to US consumers, or a combination of both. UK technology businesses that rely on US made components or software may face higher costs or delays due to tariffs. The increased costs of importing raw materials or components from the US may impact the overall price and availability of UK products, potentially making them less attractive to both US consumers and global markets. Both of these consequences are likely to reduce the competitiveness of UK technology products in the US market and the profitability of UK technology businesses. The share value of UK technology businesses could tumble and this current uncertainty will not add any encouragement to the markets already coming to terms with the challenging business environment in the UK. A review of existing long-term contracts is advisable to understand the contractual landscape for any tariffs imposed.
Reduced market access and uncertainty
The US is a key market for many UK technology businesses, particularly in sectors like software, AI, telecommunications, and hardware. Increased tariffs or trade restrictions are likely to make it more difficult for UK businesses to expand or maintain their market share in the US, potentially leading them to focus more on other markets (e.g., Europe, Asia) or seek alternative ways to reduce their exposure to the US. This uncertainty can make long-term planning and investment decisions more difficult. UK technology businesses might need to adjust their strategies or diversify their markets to mitigate the risk of future tariffs or trade policy shifts. Having a closer trading relationship with Europe and elsewhere should become a key government priority to mitigate this risk. The risk of US tariffs are also likely to impact on decisions made about investment and innovation immediately as businesses and investors may wait for the landscape to become more certain.
Opportunity/need for diversification
The trade tensions should push UK technology businesses to look for new markets or build stronger partnerships outside the US. This could reduce dependency on the US market, potentially leading to more global diversification in the long run – but this is easier said than done.
If the worst does materialise, it’s unlikely that the UK will retaliate in any meaningful way with its own tariffs or trade barriers, but tensions will mount and the special relationship will be tested. While some businesses may face immediate challenges, others may find ways to diversify and minimize the risks. The short-term challenges of these risks are just adding further uncertainty and pressure on UK businesses still coming to terms with the first new Government budget. We keep hearing that UK businesses are resilient, adaptable and innovative, but wouldn’t it be lovely to have a little more wind in the sails from somewhere.