More than one in five small and medium-sized businesses in the UK say international trade tariff disputes continue to be the biggest challenge facing their business, as global tensions continue to drive up costs and disrupt supply chains.
New research from Paragon Bank, based on a survey of 1,000 SMEs, found that 21 percent currently see tariff wars as their biggest concern – ahead of labor shortages, inflation and domestic regulatory pressures.
The findings come nearly a year after Donald Trump imposed a new round of global tariffs, with ongoing geopolitical tensions making international trade even more uncertain. Companies cited rising input costs, supply chain disruptions and falling profit margins as the most immediate consequences.
The impact is particularly severe in the sectors most affected by international trade. In transport and warehousing, more than a third (36 percent) of SMEs said tariffs were their biggest challenge, while in manufacturing one in four companies reported the same.
A quarter of respondents said their profit margins had been directly impacted, while 23 percent reported limited access to export markets or weaker demand from foreign customers.
Tariff uncertainty also puts a strain on trust and planning. Around 22 percent of SMEs said that this made decision-making more difficult, 20 percent reported longer production times and 17 percent said that this had reduced sales.
The recent wave of trade disputes has its roots in escalating tensions between major global economies, particularly the US-China trade war that began in 2018. The new US tariffs introduced in April 2025 triggered retaliatory measures and caused renewed volatility for companies operating across borders.
The consequences for British SMEs have been far-reaching. Companies that rely on imported materials or export markets faced immediate cost increases, while companies further down the supply chain were also affected by higher prices and delays.
Phil Hughes, deputy managing director of SME lending at Paragon Bank, said the impact extended far beyond companies directly involved in international trade.
“Trade tariff disputes have created significant challenges for SMEs, not just those importing or exporting, but also those further down the supply chain,” he said. “Beyond the immediate impact on costs, tariff uncertainty has made planning and decision-making increasingly difficult, leaving many businesses in limbo.”
Hughes said some SMEs had delayed investment or scaled back growth plans due to the ongoing uncertainty.
While many companies have so far coped with rising costs, there is growing concern about how sustainable this approach will be if tensions continue. In response, SMEs are increasingly exploring alternative sourcing strategies, renegotiating supplier contracts and investing in measures to improve resilience.
“SMEs have shown real resilience, but with ongoing tariff uncertainty there are understandably questions about how long this can be sustained,” added Hughes. “As a lender serving more than 16,000 UK SMEs, we are ready to support UK businesses with tailored financial solutions to help them adapt and grow in an increasingly unpredictable global trading environment.”
