Accountants Guide: What do the US tariffs mean for your clients?

The US president, Donald Trump, rewrote the global trade rulebook after announcing tariffs on imported foreign goods for most countries, including the UK, on what he called ‘Liberation Day’. The sweeping tariffs have triggered a global trade war and major upheavals in the global economy; however, the UK successfully negotiated a trade deal that reduces and eliminates some of the tariffs originally announced. 

Trump introduced levies on imported goods to drive businesses to set up operations in the US and revive the American manufacturing industry. The US President continues to target the international trade arena to raise revenues and make America more desirable for businesses.

We look at how clients can navigate US tariffs and your role as accountant throughout this process.

Updated - A guide to US tariffs for UK business owners

President Trump announced a universal tariff on most imported goods, sector-specific tariffs, and reciprocal tariffs tailored to selected countries. While the UK is subject to the baseline tariff, other countries including the EU are subject to higher rates, although a 90-day pause is currently in play, unless a trade deal is negotiated earlier. 

US tariffs for UK business owners:

• 10% tariff on imported foreign goods from 5 April – exemptions apply to aerospace and electronics, such as computers and smartphones
• 10% tariff on 100,000 imported vehicles every year, originally 27.5% 
• No tariff on imported aluminium and steel, originally 25%

The UK is subject to the 10% universal tariff, which is the baseline. The goalposts have significantly changed since the Liberation Day announcement following a successful round of trade negotiations between the US and UK. 

A 25% tariff on aluminium and steel imports was originally announced ahead of the ‘Liberation Day’ announcement which came into force on 12 March - this has now been removed. The universal 10% tariff will be damaging to UK suppliers as the US is the UK’s second largest export market after the EU. Paired with challenging trading conditions, soaring energy costs and a slump in consumer demand, your clients may require a helping hand to navigate rising costs.

The automotive industry is also hard-hit with a 10% tariff on vehicle imports, originally a 25% tariff. UK businesses have had a limited window to evaluate the impact of the tariff on their business, which means clients caught by the tariff must respond without delay to minimise the impact.

What the US tariffs mean for UK businesses

Clients that directly trade in US markets and export goods to the US will see the impact first-hand, while some clients may see an indirect impact, such as through supply chain disruption, price increases and changes in product availability. Clients with trading partners across the EU or other countries may feel the brunt of US tariffs if suppliers increase their prices to help absorb the costs.

To support clients throughout the ongoing tariffs battle, accountants must assess their clients’ exposure to financial risk, including the risk of insolvency. This will help them make informed decisions when revising their export strategy and finetuning other areas of the business to operate more efficiently. Your professional guidance throughout this stage is critical for helping clients secure the long-term viability of their business.

Here are some of the ways accountants can support clients impacted by the US tariffs.

Company restructuring support – If you have clients in a financially tight position, albeit viable, company restructuring can help their business onto a stronger footing. It can relieve the financial burden on a business which may involve renegotiating debts or payment terms with creditors, simplifying company structure or facilitating the sale or refinance of company assets to reduce overheads and bolster cash flow.

Refer your client to a licensed insolvency practitioner for professional guidance on company restructuring options.

Corporate insolvency guidance – If you have clients who are unable to continue trading due to cash flow deficiencies, overwhelming liabilities and creditor pressure, refer them to a licensed insolvency practitioner. If a client is insolvent and continues trading, the consequences can be detrimental, including personal liability for company debts.

Revise export strategy – If your client’s existing export strategy is no longer fit for purpose following the introduction of US tariffs, this may be a fitting time for them to revise their approach. Your client may request a review of their company finances to measure the breaking point of their business. This knowledge is vital so clients can understand how much breathing space their business can afford.

As part of your client’s review of their export strategy, they may consider entering alternative markets or diverting investment to other areas.

Review supply chain – As suppliers raise their prices to offset the impact of US tariffs, clients on the edge of insolvency may search for alternative suppliers to keep overheads manageable. While higher prices may be inevitable due to universal tariffs, clients on the edge of insolvency may have no option but to source alternative suppliers to drive costs down.

As the global trade war continues, business owners impacted by the tariffs must protect the financial health of their business and work in partnership with their accountant to keep a close watch on their company balance sheet and cash flow. If your client requires urgent corporate insolvency or restructuring support in light of the US tariffs, contact a licensed insolvency practitioner at your local BTG Begbies Traynor Group office.