More than one in five UK small and medium-sized enterprises (SMEs) say international trade tariff disputes remain the single biggest challenge facing their business, according to new research from Paragon Bank. The survey, which questioned 1,000 SMEs, found that 21% of respondents ranked tariff wars above labour shortages, inflation, and domestic regulatory pressures.
The findings come nearly a year after Donald Trump introduced a new round of global tariffs, with ongoing geopolitical tensions continuing to disrupt supply chains and increase costs. Businesses cited rising input costs, supply chain disruptions, and shrinking profit margins as the most immediate consequences.
The impact is particularly pronounced in sectors that rely heavily on international trade. In transportation and storage, 36% of SMEs said tariffs were their primary challenge, while in manufacturing, one in four businesses reported the same. A quarter of respondents said their profit margins had been directly affected, while 23% reported reduced access to export markets or weaker demand from overseas customers.
Tariff uncertainty is also affecting business planning and confidence. Around 22% of SMEs said it was hampering decision-making, 20% reported longer production times, and 17% said sales had fallen as a result of trade disputes.
The latest wave of trade tensions has its roots in longstanding disputes between major global economies, most notably the US–China trade war that began in 2018. Fresh US tariffs introduced in April 2025 triggered retaliatory measures from other countries, creating renewed volatility for businesses operating across borders.
Phil Hughes, deputy managing director of SME lending at Paragon Bank, said the effects of tariffs extend beyond companies directly engaged in international trade. “Trade tariff disputes have created significant challenges for SMEs, not only 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 a state of limbo.”
Hughes added that some SMEs had delayed investment or scaled back growth plans due to the ongoing uncertainty. While many businesses have absorbed rising costs so far, concerns are growing about the sustainability of this approach if tensions persist.
In response, SMEs are increasingly exploring alternative sourcing strategies, renegotiating supplier contracts, and investing in measures to improve resilience. Hughes said Paragon Bank is ready to support these businesses with tailored financial solutions to help them adapt to the unpredictable global trade environment.
“SMEs have shown real resilience, but with tariff uncertainty continuing there are understandable questions about how long this can be maintained,” he said.
The survey highlights the growing pressures on UK SMEs navigating a complex international trade landscape, where rising tariffs and ongoing geopolitical conflicts are shaping business strategies and long-term planning.
