The five steps UK SMEs should take now to prepare for Trump’s second coming – London Business News | Londonlovesbusiness.com

The international delivery expert Parcelhero says Donald Trump’s return to power is likely to have a greater impact than Keir Starmer’s election on many UK SMEs.

Businesses should take action now to keep on top of a changing situation.

Parcelhero’s Head of Consumer Research, David Jinks M.I.L.T., said, ‘Trump returns to the White House on 20 January but his victory is already impacting  international markets. UK exporters and importers, together with their logistics partners, need to move quickly to prepare for the likely difficulties and seize the opportunities Trump’s return to power will bring.

‘Our advice is:

• Continue with your export plans: Continued reliance on the UK market is a risk
• Prepare for the worst… Trump may deliver on his pledge to introduce a 20% import tax on all goods from overseas
• …But be ready for the best: Trump previously pledged a US-UK Free Trade Deal if he returned to office, while a strong dollar makes UK imports into the US competitive
• Consider crypto: The incoming administration is a strong supporter of digital currencies
• Ditch traditional surface mail: Trump wants to dismantle much of the role of the state and the USPS is already in his sights. Expect service cuts and possible industrial action.

Continue with your export plans

‘President-Elect Trump’s victory comes at a sensitive time for UK manufacturers and retailers. Labour’s recent Budget hasn’t really moved the dial on a lacklustre economy. If anything, it has unsettled consumers and markets, with the CBI stating it was “a tough Budget for businesses, given the increase in National Insurance Contributions and other employer cost base increases”.

‘It’s small wonder many companies have been looking further afield to increase their sales. This month’s Office for National Statistics (ONS) figures reveal more than 1 in 5 (22%) of businesses with 10 or more employees have exported goods, services or both in the last 12 months.

‘Many of these products will be destined for the US. America is now Britain’s single largest overseas market, accounting for 17.6% of UK trade. Total trade in goods and services (exports plus imports) between the UK and the United States was £304.3 billion in the four quarters to the end of Q2 2024, with UK exports to the US amounting to £188.2 billion. Even facing some disruption, it’s a market too big to ignore.

Prepare for the worst…

‘However, the costs of exporting are already rising and Trump’s election could fuel the fire. 30% of exporting businesses with 10 or more employees reported that the cost of exporting had increased this September, compared with September 2023. Trump’s much vaunted 20% blanket imports tax, were it to be implemented, would further increase costs.

‘UK growth could be halved if Trump imposes the swingeing new tariffs he has threatened, the National Institute of Economic and Social Research (NIESR) claims. It says the measures would result in weaker activity, rising inflation and higher interest rates from the Bank of England.

‘Certainly, a 20% tariff (or, at least, a more realistic 10%, as some economists are now predicting) on UK exports to the US would have a significant impact on the price of many products, from whiskey to Barbour jackets. In addition, there is the lingering fear that Trump could revive his former trade disputes with the EU and UK over steel and aircraft. To cap the possible bad news, America’s $800 “de minimis” limit, allowing for the free entry of low-cost products to the USA, particularly from international e-commerce platforms, is unlikely to survive.

…But be ready for the best

‘However, the opposite may happen. While a 20% tariff on UK goods is possible, it’s not inevitable. Countering former President Barack Obama’s comments about Britain being “at the back of the queue” for a free trade deal post-Brexit, Trump said upon leaving office in 2020 that, if his Presidency had continued, Britain would have been promoted to the front of the line. A UK-US free trade agreement would eliminate taxes on imports of most British goods into the US and vice versa.

‘Looking positively, we’re already seeing opportunities opening up. The dollar spiked in value with news of Trump’s victory. Investors expect to see deregulation and tax cuts, which will boost the value of the dollar still further. At the same time, the pound slumped against the dollar this Tuesday after the release of weak UK employment data. For various reasons, most analysts expect to see a continuing strong dollar, making UK imports into the US better value.

Consider crypto

‘Trump has pledged to turn the US into “the crypto capital of the planet” and to replace the chair of the Securities and Exchange Commission, Gary Gensler, who led efforts by President Biden to increase oversight of the sector.

Trump has also announced the launch of his own crypto venture, World Liberty Financial, while Elon Musk, who will help spearhead the new Department of Government Efficiency (DOGE), is also a huge crypto fan. In fact, DOGE is even named after Dogecoin, the crypto currency that Musk promotes. UK companies accepting crypto payments from US businesses and consumers may find such currencies less volatile than previously.

Ditch traditional surface mail

‘Finally, UK companies should also carefully consider how they plan to get their goods to US markets. That applies particularly to SME exporters and marketplace traders who use traditional surface mail services.

‘Privatisation of the US Postal Service (USPS) may still be high on Trump’s agenda. Right at the start of his first Presidency, Trump commissioned a report that claimed: “A privatized Postal Service would have a substantially lower cost structure.” Musk’s new DOGE reforms are likely to look at the service. A privatised or partially privatised USPS would potentially raise prices and reduce services for UK SME exporters using surface mail.

‘Remember, Trump’s own man, former Trump donor Louis DeJoy, is still in charge of the USPS. While he went relatively quiet on his plans for reform under Biden, he could well return to his agenda of significant cuts to services in preparation for potential privatisation. That, in turn, could lead to industrial action by postal workers.’