How Can UK Business React to New Tariffs

3rd April 2025

The United States has recently announced new tariffs on imports from the United Kingdom. A 10% tariff will be applied to all UK goods exported to the US2. Additionally, a 25% tariff will be imposed on all foreign cars imported into the US, which could significantly impact the British car industry3. These measures are part of broader global tariffs introduced by the US.

Based on recent reports and expert analysis, several key UK product categories are expected to feel the brunt of the new US tariff measures:

Automobiles and Automotive Components The automotive sector is taking one of the hardest hits. While the baseline tariff of 10% applies broadly, US officials have confirmed a separate 25% tax on imported cars. Iconic British brands such as Jaguar Land Rover, Mini, and Aston Martin are especially vulnerable. With UK car exports having a significant footprint in the US market, the high tariff not only risks reduced sales but also pressures manufacturers to consider shifting production or re-engineering pricing strategies to stay competitive.

Pharmaceuticals Pharmaceuticals represent another critical export from the UK, with billions of pounds in trade flowing into the US each year. Although these products often operate on tight margins, the added cost burden from tariffs could erode their competitive advantage. In an industry where even modest price increases might reduce demand in such a cost-sensitive market, the tariff could have a pronounced impact on future export volumes.

Heavy Industry, Fishing, and Energy Products Some industry experts have highlighted that products from sectors such as fishing, coke (a coal by-product), refined petroleum products, and mining exports will be highly sensitive to tariff changes. One analysis even forecasts that fishing exports could drop by over 20% due to the sector's high price elasticity. Similarly, coke, refined petroleum products, and mining outputs may see declines in the 20-21% range as US buyers react to the increased cost.

Food and Drink Certain signature British food and drink items, for example, Scotch whisky, are also expected to be affected. While not every premium food or beverage product is equally sensitive, the cumulative effect of tariff-induced price increases could reduce their attractiveness in the competitive US marketplace.

Additional Insights The ripple effects of these tariffs extend beyond immediate pricing. UK businesses may find themselves reassessing supply chains, exploring alternative export markets, or even considering local production options in the US to circumvent heightened costs. The evolving trade environment might spark new industry collaborations or drive the government to pursue bilateral negotiations aimed at mitigating these adverse impacts.

Moreover, while the current focus is on these sectors, the situation remains dynamic. Broader discussions about tariff reciprocity and long-term trade strategy could eventually redefine how these industries operate on a global scale. Such strategic shifts are worth monitoring closely if you're interested in the long-term implications for UK exports, employment, and industry competitiveness.

UK companies have several strategic avenues they can follow to mitigate the impact of US tariffs. Here are some detailed strategies that many are considering:

Seek Tariff Relief and Exemptions Governments often offer relief programs or exemptions for certain industries or products. By engaging with UK trade bodies and consulting trade experts, companies can explore opportunities to reduce tariff liabilities through exemption schemes or relief programs. This approach might directly lower import costs and ensure that price hikes are kept to a minimum.

Diversify and Restructure the Supply Chain One of the most effective long-term responses is to diversify sourcing. Instead of relying solely on suppliers from regions that face high tariffs, companies can pivot to alternative suppliers in countries with lower—or no—tariff exposure. This strategy may involve:

Expanding Supplier Base: Sourcing materials from tariff-neutral regions such as parts of the EU, Vietnam, or India to stabilize costs.

Renegotiating Terms: Working with existing suppliers to adjust contract terms or even consolidating shipments to benefit from economies of scale.

By reducing dependency on a single market or supplier chain, companies can build resilience into their operations, cushioning the impact of tariff-induced cost increases.

Nearshoring and Localizing Production Companies may explore options for nearshoring or establishing production facilities closer to the US market. Shifting production either within the UK or in countries that can serve as hubs to the US can significantly lower the costs and logistical complexities introduced by tariffs. This move not only offsets some of the added expense but can also improve delivery times and reinforce market presence.

Embrace Digital Transformation and Scenario Planning Investing in digital technologies can help businesses respond more fluidly to policy changes. For example:

Data Analytics & Scenario Modelling: Advanced analytics can forecast the financial impact of various tariff scenarios, helping firms decide whether to absorb, pass through, or otherwise mitigate costs.

Supply Chain Management Tools: Digital platforms can optimize inventory, refine logistics, and provide real-time monitoring to adjust sourcing strategies as international trade dynamics evolve.

These tools empower companies to act swiftly rather than reactively, turning uncertainty into manageable risk.

Reassess Pricing and Cost Management Strategies Adjusting business models to reflect the added costs of tariffs is crucial:

Dynamic Pricing: Companies can analyze the elasticity of their products' demand to determine if and how much of the extra cost can be passed onto consumers without significantly reducing volume.

Operational Efficiency: Implementing cost-saving measures internally—from streamlining operations to reducing waste—can help counterbalance the increased import costs.

This balanced approach helps maintain competitiveness in both domestic and international markets3.

Engage in Policy Advocacy and Collaborative Strategies Often, the most effective long-term solutions involve coordination at a broader industry level. By collaborating with industry associations and trade councils, companies can collectively advocate for favourable trade terms or adjustments to policy. This collaboration can also mean sharing best practices for adapting to new regulations and structurally preparing for future changes, creating a unified voice that may influence policy discussions.

Collectively, these strategies enable UK companies not only to buffer the immediate effects of higher tariffs but also to position themselves for sustainable growth as global trade policies evolve. By rethinking traditional supply chains and embracing digital innovation, firms can transform policy challenges into opportunities for innovation and market resilience.

Below are several illustrative examples—grounded in recent research and industry reports—demonstrating how UK companies have successfully adapted their strategies in response to heightened US tariffs:

1. Automotive Sector: Diversification and Local Production
Jaguar Land Rover, along with other established car manufacturers, faced steep new tariffs on vehicles exported to the US. In response, these companies accelerated efforts to reconfigure supply chains. Their strategies included:

Diversifying Suppliers: Expanding their network to include regions with more favorable tariff conditions helped lower component costs.

Localizing Production: By exploring local assembly or partial manufacturing in the US, companies could sidestep some of the tariff burdens entirely.

Such strategic moves, underscored by analyses in recent reports like the "Tariffs and Triumph" review, highlight how embracing geographic flexibility and supplier diversity can not only mitigate immediate cost pressures but also bolster long-term competitiveness .

2. Electronics and Manufacturing: Agile Supply Chain Reconfiguration
A notable case involves a UK electronics manufacturer that, prior to facing upward of 10-25% cost increases on semiconductor components, initiated a robust digital transformation of its supply chain. Their approach included:

Supplier Diversification: Sourcing from new markets to avoid reliance on US components.

Digital Supply Chain Management: Implementing advanced analytics and real-time monitoring systems to rapidly assess and reconfigure logistics based on shifting tariff scenarios.

This proactive adjustment allowed the company to control margin erosion while maintaining the consistency and quality expected by its US clientele. The evolution in strategy echoes broader themes observed by experts in assessments of tariff impacts across UK supply chains .

3. Food and Beverage: Strategic In-Country Operations
In the Scotch whisky sector—a key export challenged by tariff-induced price shifts—some distillers turned to creative operational restructuring. Their adaptations included:

Local Bottling Operations: Establishing bottling facilities within the US, thereby exporting an intermediate product rather than the final bottled whisky, helped circumvent the full weight of the tariffs.

Revised Distribution Channels: Adjusting logistics to better integrate with domestic US networks allowed companies to maintain their premium brand positioning without passing excessive costs on to consumers.

This model of embedding part of the production process in the target market demonstrates innovative thinking when direct exports become less economically viable. Industry studies have flagged such adaptations as both a resilience measure and a competitive advantage in turbulent trade environments 3.

4. Pharmaceutical Sector: Embracing Digital and Production Flexibility
Large pharmaceutical companies, such as GlaxoSmithKline (GSK), have also been active in countering tariff pressures. Their successful adaptations have revolved around:

Restructured Supply Chains: Shifting elements of production to different locations based on tariff exposure.

Enhanced Digital Scenario Planning: Investing in predictive analytics to forecast tariff impacts enabled rapid decisions concerning production and pricing strategies.

This approach not only maintains competitive margins but also ensures the continued supply of essential medicines in a highly competitive global market. Such digital and operational agility serves as a strong case study for balanced risk management in sectors facing periodic policy shifts .

These examples illustrate how UK companies across diverse sectors have turned tariff challenges into catalysts for strategic transformation. Whether by diversifying supply chains, localizing production, or leveraging digital tools for agile planning, these adaptations have paved the way for greater resilience and a more robust international presence.

Over the long term, UK companies that adapt to tariff challenges tend to experience both structural shifts and emerging opportunities that can redefine their competitive landscape. Here are some of the key long‑term impacts of these adaptations:

Enhanced Supply Chain Resilience and Flexibility By diversifying suppliers, localizing or nearshoring production, and embracing digital transformation, companies build more resilient supply chains. Although making these shifts can require significant upfront investment, over time they often lead to operations that are less vulnerable to future trade disruptions or policy changes. This flexibility not only helps absorb tariff shocks but also positions firms to respond nimbly to other global economic shifts.

Evolution in Contracting and Pricing Strategies Tariffs have forced many businesses to rework long‑term contracts and fixed pricing deals—traditional arrangements that were once set in stone. Over time, companies are increasingly incorporating flexibility into their agreements through clauses that allow for periodic pricing adjustments or renegotiations based on shifts in international trade costs. This evolution smooths out profit margins and allows businesses to navigate market volatility more predictably .

Operational Efficiency and Digital Innovation The push for digital tools—such as advanced analytics for supply chain monitoring and forecasting—has enabled companies to pinpoint cost drivers more accurately and adjust operations accordingly. In the long run, these investments in digital transformation often result in not only better risk management but also operational efficiencies that can reduce costs and improve competitiveness. What starts as an adaptation to counteract tariffs can evolve into a permanent competitive advantage.

Market Reorientation and Diversification of Trade Partners As businesses redesign their supply chains and adjust their market strategies, they frequently diversify beyond the US market to explore emerging opportunities in Europe, Asia, or domestic segments. This broader market reorientation helps reduce the reliance on any single export market, in turn providing greater stability. Over time, developing a more varied portfolio of trade partners can lead to stronger, more balanced growth, even in the face of global tariff pressures .

Industry Collaboration and Policy Influence Facing common challenges often galvanizes industry-wide collaboration. UK companies adapting to tariffs are increasingly working together through trade associations and partnerships to negotiate more favorable conditions and lobby for policy changes. This collective action can influence long‑term trade policies and create a more stable business environment while also driving the formation of new industry standards and practices.

In summary, while the immediate response to tariff shocks often involves cost hikes and short-term disruptions, these adaptations tend to catalise a deeper, more sustainable transformation within businesses. Companies emerge with more resilient supply chains, flexible cost structures, stronger digital capabilities, and diversified global trade networks. This evolution not only mitigates the risk of future external disruptions but, over time, lays the groundwork for sustained competitive growth.