More than a fifth of UK SMEs say the trade tax battle is still their biggest challenge

More than one in five UK small and medium-sized businesses say international trade price disputes remain the single biggest challenge facing their business, as global tensions continue to drive up costs and disrupt supply chains.

A new study from Paragon Bank, based on a survey of 1,000 SMEs, found that 21 percent now consider tax wars to be their most important current 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 political tensions adding more uncertainty to international trade. Businesses have cited rising input costs, supply chain disruptions and shrinking profit margins as immediate consequences.

The impact is worst on the sectors most exposed to international trade. In transport and storage, more than a third (36 per cent) of SMEs said pricing represented their biggest challenge, while in doing business one in four reported the same.

A quarter of respondents said their profit margins were hit directly, while 23 percent reported reduced access to export markets or weaker demand from international customers.

Price uncertainty also suppresses confidence and planning. About 22 percent of SMEs said it interfered with decision-making, 20 percent reported longer production times, and 17 percent said sales decreased as a result.

The latest wave of trade disputes has its origins in rising tensions between the world’s major economies, particularly the US-China trade war that began in 2018. The new US tariffs introduced in April 2025 created retaliatory measures, creating new instability for businesses operating across borders.

For UK SMEs, the results are far-reaching. Companies that rely on imports or foreign markets have been hit by rapidly rising costs, while firms that cut down supply chains have also been hit by higher prices and delays.

Phil Hughes, deputy director of SME lending at Paragon Bank, said the impact extended beyond businesses directly involved in international trade.

“Trade tax disputes have created major challenges for SMEs, not only those that import or export, but also those that continue down the supply chain,” he said. “Besides the impact on costs, cost uncertainty has made planning and decision-making more difficult, leaving many businesses in a precarious position.”

Hughes said some SMEs have delayed investment or scaled back growth plans due to continued uncertainty.

While most businesses have so far contained rising costs, concerns are growing about how sustainable that trend will be if tensions continue. In response, SMEs are increasingly exploring alternative sourcing strategies, renegotiating supplier contracts and investing in ways to improve resilience.

“SMEs have shown real resilience, but with continued funding uncertainty there are understandable 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 British businesses with tailored finance solutions to help them adapt and grow in an increasingly unpredictable global trading environment.”