The UK has secured new trade agreements with both the United States and India, cutting tariffs and opening fresh export opportunities.
While government leaders hail these deals as major wins, small and medium-sized businesses (SMEs) must look beyond the headlines.
New market access brings potential, but looming policy shifts could increase trading pressures for some firms.
UK–US Trade Deal: Export Boost for Cars and Aerospace, But Retailers Should Stay Alert
The latest UK–US agreement cuts tariffs on key British exports, providing immediate opportunities for manufacturers:
- The US will slash tariffs on up to 100,000 UK-made cars per year, reducing rates from 27.5% to 10%
- British aerospace firms will export Rolls Royce engines and aircraft parts to the US tariff-free
With the UK exporting around £9 billion in cars to the US annually, this deal delivers a clear boost to the automotive sector and its supply chains.
However, the government may trade away something that directly affects small businesses.
Reports suggest the UK might scrap its 2% digital sales tax as part of the negotiations.
This tax, introduced in 2020, specifically targeted tech giants like Amazon and raised £800 million per year to support public services. Crucially, it also aimed to level the playing field for high street retailers by increasing tax contributions from dominant online platforms.
If the government removes this tax, small retailers could face even tougher trading conditions, competing against online giants with fewer financial obligations.
Will the US Cut More Tariffs for the UK?
At present, most British goods entering the US face a 10% tariff, while UK steel and aluminium attract a steep 27.5% duty.
However, Prime Minister Keir Starmer has confirmed that his team is pushing to include UK steel in future tariff reductions.
President Trump has already described the current agreement as “conclusive,” but he also hinted that more trade announcements are on the way.
UK–India Trade Deal: Lower Tariffs and a Controversial Tax Break for Foreign Workers
The UK also finalised a major trade agreement with India, giving exporters better access to one of the world’s fastest-growing markets.
British businesses can now export a wider range of products to India with reduced trade barriers, including:
- Luxury cars and cosmetics
- Gin, whisky, chocolate, and biscuits
- Lamb, salmon, and other premium foods
- Aerospace, electrical, and medical equipment
The deal also cuts tariffs on Indian goods sold in the UK, covering:
- Jewellery and gemstones
- Clothing, footwear, and textiles
- Frozen prawns and other food items
- Automobiles
UK–India trade already reached £50 billion in 2024, and the government estimates this new agreement could increase trade by an additional £25.5 billion annually by 2040.
National Insurance Controversy: A Two-Tier Tax System?
One policy in the India deal has sparked political backlash. The agreement extends a National Insurance exemption for Indian nationals on short-term UK visas, meaning employers won’t pay NI contributions for these workers.
Critics warn this policy creates financial incentives for companies to hire overseas workers instead of British staff, effectively introducing a two-tier tax system.
Conservative leader Kemi Badenoch criticised the policy, claiming she rejected a similar proposal when she served as Business Secretary because it could cost the UK economy millions.
What Should UK SME Leaders Do Now?
While these trade deals offer exciting export opportunities, they also introduce new risks.
Retailers and domestic-focused businesses could see increased competition from both global online giants and cheaper imports.
Now is the time for SME leaders to:
- Assess export strategies to take advantage of new tariff reductions
- Review supply chains for potential cost savings or new supplier relationships
- Monitor policy announcements closely, especially around tax and employment rules
The government will publish the final terms of these deals in the coming weeks. Staying informed will help businesses respond quickly to both opportunities and threats as the details emerge.
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