Ambitious UK startups are facing significant hurdles as access to the US market becomes more complicated. As of April 5, 2025, most goods exported from the UK to the US are now subject to an additional 10 percent tariff, a measure stemming from trade policies enacted during the presidency of Donald Trump. This shift raises concerns for many tech startups that rely on the US for growth and investment.
The Department for Business and Trade has indicated that while services remain unaffected, the new tariffs apply to a wide range of physical goods, adding friction to what was once a smooth trade relationship. This change is particularly impactful for tech companies dealing in hardware and electronic devices, forcing them to reconsider their pricing strategies almost overnight. Reports suggest that the US imported £57.1 billion worth of goods from the UK in 2024, reflecting a 2 percent decline from the previous year, illustrating the sensitivity of this trade relationship.
Impact on Tech Startups
Many UK tech SMEs are expressing concern over the feasibility of absorbing these increased costs or passing them on to US customers without harming demand. Legal analysts at Browne Jacobson characterized the situation as disruptive, noting that companies may need to revisit pricing, supplier contracts, and product designs in light of the new tariffs. Some startups could turn to automation or AI-driven efficiencies to mitigate rising costs, but such solutions are not straightforward.
Katrina Young, founder of KYC Digital, highlighted the shift in mindset among founders and investors. “Access isn’t automatic anymore,” she told Eastern Eye. “We’re seeing investor hesitancy and delayed cross-border decisions around major trade announcements. Startups now have to build for uncertainty, not assumption.” This uncertainty is shaping strategic decisions, compelling startups to reassess their plans for expansion and market reliance.
While the impact of tariffs may seem less pronounced for service-led tech firms operating in software or digital platforms, the broader implications are still felt. According to techUK, tariffs disrupt innovation not only through increased costs but also through uncertainty surrounding trade relations. UK startups involved in fields such as AI and cybersecurity often depend on US-based resources for cloud infrastructure and research partnerships, making them vulnerable to shifts in trade policy.
Adapting to New Trade Realities
The UK-US economic deal established in June 2025 provided some relief for specific sectors, such as reducing auto tariffs from 27.5 percent to 10 percent under certain quotas and eliminating duties in aerospace. Although these changes are beneficial, the baseline 10 percent tariff continues to apply to most tech startups, which means the challenges they face remain significant.
The Institute for Government noted that while targeted relief was granted to politically sensitive industries, the overall tariff framework remains intact. Despite some industries being shielded from tariffs, the Department for Business and Trade has raised concerns about potential risks stemming from US objections to the UK’s Digital Services Tax, indicating a growing intersection between trade policy and tech regulation.
As startups navigate these changes, many are shifting their growth strategies to reduce reliance on the US market. Young suggested that founders now consider their exposure to other regions. “If the US slows, do you have visibility in the UAE? If pricing becomes harder, can you bundle differently for EU clients?” she asked, emphasizing that these considerations are now central to survival and growth.
Despite the challenges posed by tariffs, the US remains a crucial market for UK exporters. A report by The New York Times from December 1, 2025, found that many UK businesses still prioritize the US, viewing the tariffs as a manageable cost due to the market’s size and potential. However, smaller businesses are feeling the impact more acutely, with reports indicating projected losses of up to £20,000 due to tariff-related uncertainties.
Young concluded that the lesson from the current trade environment is not that global expansion is off the table, but that startups must adopt a more intentional approach. “Innovation can’t rely on access. It has to be resilient, geographically, technically, and financially.”
In summary, while access to the US market has not vanished, it is no longer a given for UK startups. As the global trade landscape shifts towards protectionism, UK firms must focus on building strong narratives, diversifying their markets, and establishing long-term relationships to ensure their resilience in an increasingly complex environment.
