In the first half of 2025, the US and some of its trading partners announced significant changes to import tariffs. This column uses newly designed questions to study the impact of these changes on UK firms and to assess the level of trade uncertainty. On average, the majority of firms expect no material impact on their sales, investment, and prices; those that do expect it to be a relatively small negative impact. Tariffs are a new source of uncertainty for firms, although the level of uncertainty remains lower than for previous shocks such as Brexit, Covid-19, or the Russia-Ukraine war.
During the first half of 2025, the US and some of its trading partners announced significant changes to tariff policies. On 2 April, the US administration announced a large set of import tariffs on almost all countries, ranging from 10% to 50%. In subsequent months, some of these tariffs were paused, revised, and trade deals were signed with individual countries, including the UK. Nevertheless, the effective US tariff rate on the rest of the world has increased from 2.3% at the end of 2024 to 8.8% in May 2025, and there remains considerable uncertainty about the evolution of global trade policies over coming quarters. To track the views of businesses following these announcements, we included a set of bespoke questions in the Decision Maker Panel (DMP) survey about the impact of tariff changes on sales, investment, prices, and uncertainty.
Following the 2 April tariff announcements, numerous columns at VoxEU have tried to assess the impact of these changes on the US economy and globally. Benigno (2025) traces out the immediate financial market reaction following the tariff announcements. Morikawa (2025) highlights the sharp rise in trade policy uncertainty in 2025 and argues this will have negative effects on the global economy and lower the effectiveness of policy measures. Conteduca et al. (2025) estimate significant welfare losses from the 2 April tariff announcements, especially for the US, and large disruptions to world trade. In the UK, the Bank of England (2025) considered a ‘weaker demand’ scenario in the May Monetary Policy Report, motivated in part by higher trade uncertainty. This scenario would lead to a greater degree of economic slack and weaker inflation than in the baseline forecast. We complement the existing evidence with direct questions from the DMP, a large economy-wide business survey on the impact of changes in US tariffs. Although our survey focuses on UK firms, responses are likely to be relevant for many other countries affected by tariffs.
The Decision Maker Panel (DMP)
We use firm-level data from the Decision Maker Panel (DMP) survey. The DMP is a monthly survey of CEOs, CFOs, and Finance Directors across businesses in the UK. It was launched in 2016. Firms are regularly asked about their realised and year-ahead expectations for a number of variables including own prices, sales, employment, and capital expenditure. The forward-looking questions can also be used to construct measures of subjective uncertainty, and firms also report the overall level of uncertainty for their business. In April 2025, new questions were added to the survey asking firms about the share of sales originating from exports to the US, the expected impact of US tariff announcements on their sales, and about US tariffs as a source of uncertainty. In May, firms were also asked about the expected impacts of tariff announcements on prices and investment, as well as about the share of total costs imported from the US and China. In this column, we summarise the key findings from these questions with data up to June 2025. The results are weighted by industry and employment shares.
Trade exposure of UK firms to the US
Direct trade exposure of UK firms to the US is relatively modest in the aggregate. Around 3% of sales revenue was attributed to US exports by firms in the survey (based on data collected over April-June 2025; Figure 1, Panel A). This compares to 6% of sales revenue generated from exports to the EU. Overall, 13% of DMP firms’ sales revenue comes from exports, and 87% is generated from domestic sales.
Figure 1 Firm trade exposure
Notes: Panel A is based on data collected over April-June 2025. Panel B is based on data collected over May-June 2025.
Additionally, since May firms were asked about the sources of their input costs. On average, 20% of UK firms’ total costs in 2024 were linked to imports, with only 2% of this coming directly from the US (Figure 1, Panel B). While this suggests the direct effects of US tariffs are limited for most firms, there may be indirect effects that raise costs through global supply chains. At the same time, reduced US demand for imports could place downward pressure on global export prices.
Tariff-related uncertainty
Uncertainty surrounding global trade policies has increased following the significant changes to tariff policy announced by the US and some of its trading partners. Tariffs ranked among the top three sources of uncertainty for 16% of firms in the DMP, based on data from April to June (Figure 2, Panel A). However, this share is still much lower than corresponding metrics for previous shocks such as Brexit or the Covid-19 pandemic. At its peak, the Covid pandemic was cited as a top three source of uncertainty for 97% of businesses in the DMP (Smietanka et al. 2020b), with Brexit being important for almost 60% at its height (Smietanka et al. 2020a). The Russia-Ukraine war was also cited as a top three source of uncertainty by 35% of businesses over March-October 2022 (Yotzov et al. 2022).
Although tariff uncertainty appears to have been relatively contained overall, there are clear differences depending on firms’ exposure to the US. Among US exporters, 29% of businesses reported that tariffs were a top three source of uncertainty, on average over April-June (Figure 2, Panel B). Meanwhile, 18% of non-US exporters cited US tariffs as a top three source of uncertainty, as did around 9% of firms which do not export. At the same time, only 17% of US exporters do not consider tariffs to be an important source of uncertainty, compared with 43% of non-exporters.
While tariff-related uncertainty is likely to have some negative effect on global growth, UK businesses expect its direct impact on them to be limited so far. However, tariffs only represent one factor contributing to the overall uncertainty facing firms.
Figure 2 US tariffs as a source of uncertainty by firm export status
Notes: Tariff uncertainty results are based on the question: ‘How important are the recent changes in US trade policy as a source of uncertainty for your business?’. The results are based on data collected over April-June 2025.
The DMP survey contains a number of different indicators of overall uncertainty. These have risen modestly over the recent past, consistent with some impact from US tariffs, but they also remain well below earlier peaks. UK firms are asked directly to assess the overall level of uncertainty currently facing their business. In the three months to June, 56% of firms reported the overall level of uncertainty facing their business to be high or very high. This was one percentage point lower than in the three months to April, but it is higher than the average of 50% over 2024 (Figure 3). A measure of uncertainty around year-ahead sales growth can also be constructed from questions in the DMP that ask about the distribution of firms’ expectations. Uncertainty around year-ahead sales growth increased marginally in the three months to June, but these increases are small in comparison to the Covid pandemic and sales uncertainty is still around its 2019 average. In contrast, uncertainty about year-ahead price growth has continued to fall over recent months. The absence of a sharp increase in firm-level uncertainty contrasts with text-based trade uncertainty measures, which have surged in recent months (e.g. Morikawa 2025).
Figure 3 US tariff uncertainty compared to other measures of uncertainty
Notes: Sales uncertainty is the average standard deviation around expected year-ahead sales growth. The price uncertainty index is constructed using the standard deviations of expected firm-level price growth over the next 12 months. The sales and price uncertainty indices are normalised using the average value for 2019, before three-month moving averages are applied. The overall uncertainty data is based on the question ‘How would you rate the overall uncertainty facing your business at the moment?’. The chart shows three-month moving average data for price and sales uncertainty and overall uncertainty, and single-month data for US tariff uncertainty.
Tariff impacts on sales, investment, and prices
The DMP survey asked firms how they expected the implementation of new US tariffs to affect their sales and investment over the next year. Over April-June, 70% of firms expected no impact on their sales. 27% of firms expected that their sales would be lower in the year ahead as a result of US trade policy changes, with around 3% expecting a positive impact (Figure 4, blue bars). Firms that export directly to the US were more likely to expect tariffs to lower their sales, relative to what would have otherwise happened. 47% of firms who have some exports to the US expected tariffs to reduce their sales over the next year, compared to 20% of firms with no US exports.
The impacts of higher US tariffs on investment were expected to be similar to those on sales. Over May-June, 75% of firms expected no impact on their year-ahead investment while, 23% of businesses expected a negative impact (Figure 4, red bars). Lower sales growth may be one factor that leads firms to invest less, but increased uncertainty is likely to be important too. Firms who viewed US tariffs as an important source of uncertainty were also more likely to expect to lower their investment.
Figure 4 Expected impact of US tariffs on firm sales and investment
Notes: US tariff impact on sales and investment results are based on the questions: ‘How do you expect the recent changes to US trade policy to affect the capital expenditure of your business over the next year?’ and ‘How do you expect the recent changes to US trade policy to affect the SALES of your business over the next year?’. Results on sales are based on data collected over April-June 2025. The impacts on investment are based on data collected over May-June 2025.
The DMP survey also asked firms how they expect changes in US trade policy to affect their prices over the next year. Over May-June, 17% of firms expected tariffs to lower their prices, while 10% expected higher prices, while a large majority expected no significant impact (Figure 5). So, a net balance of firms expected US tariffs to lead to lower UK prices. In the aggregate, firm annual own-price growth has declined from 3.8% in the three months to January to 3.5% in the three months to June. Meanwhile, expected year-ahead own-price growth has fallen from 3.9% in the three months to January to 3.6% in the three months to June.
Figure 5 Expected impact of US tariffs on firm prices
Notes: Tariff impacts on prices results are based on the questions: ‘How do you expect the recent changes to US trade policy to affect the average price that your business charges over the next year? Please include any impacts from tariffs on UK goods exports and the effects of additional tariffs on goods entering the US from other countries’. Results are based on data collected over May-June 2025.
Conclusion
There have been significant changes to trade policies over the first half of 2025, driven by US tariff announcements. We measure firm trade exposure to the US and the impact of these policies using new questions in the DMP survey. Direct exposure to trade with the US is limited, on average. Firms expect the impact of the tariff changes on their sales, investment, and prices over the year ahead to be negative. Still, these effects are relatively small and around 70% of firms expect no material impact. Tariffs are a new source of uncertainty for firms, although the level of uncertainty remains relatively low compared to past shocks such as Brexit, Covid-19, or the Russia-Ukraine war.
Source : VOXeu
