More than one in five UK SMEs say international trade tariff disputes remain the biggest challenge facing their business, according to new research from FTSE 250 lender Paragon Bank.
Nearly a year since Donald Trump set out a range of global tariffs and as geopolitical tensions continue over Greenland, the study of 1,000 small and medium-sized enterprises highlights the mounting pressure on businesses as global trade tensions bite - 21% of SMEs identifying tariff wars as their most significant current challenge, citing rising costs, supply chain disruption and shrinking profit margins as key concerns.
Sectors most exposed include transportation and storage, where over a third (36%) of businesses reported tariffs as their primary issue, and manufacturing, where one in four said the same.
When asked how international trade tariffs have impacted their operations, SMEs pointed to a range of issues, including:
- Rising costs of imported goods – 30%
- Supply chain disruption – 28%
- Increased cost of production – 27%
A quarter of businesses said profit margins had been directly hit, while 23% reported reduced access to export markets or falling demand from overseas clients.
Other knock-on effects included:
- Tariff uncertainty affecting planning and decision-making – 22%
- Increased production time – 20%
- Reduced sales – 17%
The current wave of tariff disputes stems from escalating tensions between major economies, most notably the US-China trade war that began in 2018. The US introduced a series of tariffs across multiple countries in April 2025, prompting retaliatory measures and creating uncertainty for businesses worldwide.
For UK SMEs, the consequences have been far-reaching. Businesses that rely on imported goods or export markets have faced immediate cost increases, while those further down the supply chain have also felt the strain.
Phil Hughes, Deputy Managing Director of SME Lending at Paragon Bank, commented: “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.
“Beyond the immediate impact on costs and supply chains, tariff uncertainty has made planning and decision-making increasingly difficult, leaving many SMEs in a state of limbo. For some, this has meant delaying investment decisions or scaling back growth plans.”
As global trade tensions show little sign of easing, SMEs are calling for greater clarity and support to navigate the challenges ahead. Many are exploring alternative sourcing strategies, renegotiating supplier contracts and investing in resilience measures to mitigate risk.
Hughes added: “SMEs have so far shown resilience in absorbing these rising costs, but with tariff uncertainty continuing there are understandable questions around how long this can be maintained. As a lender serving more than 16,000 UK SMEs, we stand ready to back British businesses with the tailored financial solutions needed to help them adapt and grow in an increasingly unpredictable trading environment.”
