How the 2025 US tariffs are impacting UK SMEs

The introduction of new US tariffs in 2025 has created a series of challenging hurdles for UK businesses, particularly small and medium-sized enterprises (SMEs) and owner-managed businesses (OMBs).

With a 10% blanket tariff on UK imports and additional 25% duties on key goods like steel and aluminium, many UK businesses are facing increased costs, disrupted supply chains, and a lot of legal uncertainty.

At Lodders, we are working closely with clients to help them understand the risks and take practical steps to protect their operations. Stuart Price, partner in our Commercial Law team, shares some key advice below.

What challenges are SMEs facing?

Rising costs

Many SMEs are locked into existing, fixed-price contracts with US customers. With tariffs now inflating the cost of goods, profit margins are being squeezed, sometimes to the point of loss.

Contractual grey areas

Standard contracts rarely account for sudden changes in trade policy. Without tariff adjustment clauses, businesses may be left footing the bill or facing disputes with customers and distributors.

Supply chain disruption

Shipping delays, customs checks, and supplier instability are making it harder to move goods in and out of the US. This is particularly problematic for businesses that rely on just-in-time delivery or single-source suppliers.

Compliance risks

US customs authorities are increasing inspections. Even a small paperwork error, such as in product classification or origin documentation, can lead to fines, delays, or even seizure of goods – risks that SMEs, in particular, can ill-afford.

So, what can businesses do?

We are seeing SMEs taking a number of practical, proactive steps:

• Renegotiating contracts: Businesses are reopening discussions with US partners to adjust pricing or delivery terms.
• Diversifying supply chains: Some are sourcing from non-tariffed countries or bringing production closer to home.
• Using government support: UK Export Finance (UKEF) is providing insurance, funding, and advisory support to help businesses manage risk.
• Improving documentation: SMEs are tightening up customs paperwork and seeking advice to ensure compliance.

Legal recommendations from Lodders

At Lodders, we know that SMEs and OMBs often operate with leaner teams and tighter margins. It is also rare to find a dedicated in-house legal function. As such, it is essential for businesses to take proactive, manageable steps to reduce both legal and commercial risk in light of the 2025 US tariffs. Here is what we recommend:

Review and prioritise your contracts

Start by identifying which of your current contracts involve US trade, whether that’s exports, imports, or working with US-based distributors or partners. Look out for:

• Fixed-price terms that may no longer be commercially viable
• Clauses that deal with changes in law, tariffs, or force majeure
• High-risk contracts e.g. those with narrow margins, high volumes, or long durations, and prioritise these for immediate review

We can help you conduct a focused contract audit to identify exposure and recommend amendments.

Add or update tariff adjustment clauses

If your contracts do not already include them, consider adding tariff adjustment clauses. A tariff adjustment clause lets you revisit pricing if tariffs or other trade barriers are introduced during the contract term.

Clauses can be tied to specific thresholds (e.g. a tariff increase of more than 5%). It’s also worth Including a process for renegotiation, or even termination, if agreement isn’t reached. This gives both parties a fair and transparent way to deal with unexpected cost increases.

Strengthen your force majeure and hardship clauses

Standard contact templates, which many SMEs rely on, often do not adequately cover trade policy changes. Now is the time to revisit these clauses.

Specifically, force majeure should explicitly include government-imposed tariffs, sanctions, or trade restrictions. Adding hardship clauses can also help provide a legal basis for renegotiation if performance becomes excessively burdensome. Ultimately, these provisions can help you avoid breach of contract, while keeping your commercial relationships intact.

Clarify responsibility for duties and taxes

Ambiguity around who pays tariffs can lead to disputes. Your contracts should clearly state:

• Whether prices are inclusive or exclusive of duties
• Who is responsible for customs clearance and associated costs
• What happens if tariffs change mid-contract

This is particularly important in distribution and agency agreements, where roles and responsibilities can be more complex.

Review your terms and conditions

If you are using standard T&Cs for sales or purchases, now is the time to update them. We recommend:

• Including a clause that allows for price variation in response to external cost increases
• Adding a right to suspend or terminate the contract if tariffs make performance commercially unviable
• Ensuring your contracts have a governing law and jurisdiction clause, and that the English courts will be the forum to resolve any disputes that might arise under the contracts.

Get ahead on customs compliance

This often gets overlooked, but it is a critical factor. Even small errors in tariff classification or origin documentation can lead to penalties or shipment delays, with smaller businesses particularly vulnerable.

Make sure your team understands the basics of US customs requirements, and keep detailed records of product origin, classification codes, and shipping documentation. We’d also recommend working with a customs broker or trade adviser if you don’t have in-house expertise.

Turning a challenge into a strength

The 2025 US tariffs are a serious challenge, but they are also a chance to strengthen your business for the future. With the right legal and commercial support, SMEs and OMBs can adapt, protect their margins, and maintain strong trading relationships.

If you’d like help reviewing your contracts or updating your terms, please get in touch with the Commercial team at Lodders. We’re here to help you navigate the changes with confidence.