2025 US tariff reforms: What you need to know

Impact

Export revenue risks

• US aircraft manufacturers earn ~35% – and in some cases, up to 70%– of their revenue from exports.
• However, rising trade tensions and retaliatory tariffs pose a risk to global sales and supply chains.
• With a current trade surplus of ~£105.37 billion, the sector’s outlook remains uncertain amid evolving tariff policy.

Program delays and budget strains

• Major US defence programmes – like the F-35 fighter jet, which relies on ~1,000 suppliers from around a dozen countries – are vulnerable to increased tariffs on imported parts and materials.
• These global supply ties are under pressure from tariffs that increase the cost of raw materials and international components.

Escalating production costs and supply chain disruptions

• Tariffs on materials like aluminium, steel, and semiconductors have raised production costs and strained supply chains
• A&D firms anticipate related losses and are pursuing mitigation measures, such as foreign trade zones and duty drawback programmes.

Impact

EV supply chains and investment plans

• US tariffs on imported EVs, components, and manufacturing equipment have increased costs and added operational uncertainty across the electric vehicle value chain.
• With ~40% of EVs sold in the US being imported, automakers with high foreign production exposure, such as Hyundai, Toyota and BMW are particularly affected.

Semiconductor tariffs tighten cost and availability

• Proposed 25% tariffs on Chinese semiconductors and electronics have added costs and supply chain uncertainty, particularly for EVs and Advanced Driver-Assistance Systems (ADAS) systems.
• Automakers are stockpiling chips and exploring regional sourcing, but high policy uncertainty may slow near-term adjustments.

Steel & aluminium tariffs increase material costs

• The US has announced tariffs of 50% on steel and aluminium imports from all countries (excluding the UK), contributing to higher material costs, especially for chassis and structural components.
• These tariffs are estimated to increase production costs by ~£1,129 per vehicle for US-based manufacturers, leading to margin pressures and prompting sourcing adjustments.
  

Impact

Escalating material costs

• The increase in Section 232 tariffs to 50% has led to higher costs for key construction materials like steel, aluminium panels, piping, insulation, and electrical components.
• In early June 2025, the Midwest premium for aluminium reached £1,036 per ton, reflecting an increase of ~190% since late 2024.
• Rebar prices also rose by over 26% in early June 2025.

Cash flow constraints and project delays

• Rising construction material costs have strained cash flows, leading to project delays of 3–6 months and some cancellations in the US.
• Developers have started re-evaluating budgets and schedules, with many postponing new projects until there is greater clarity on pricing and policy direction.

Downward revisions to UK construction growth forecasts

• The Construction Products Association (CPA) revised 2025 UK construction output growth to 1.9% (from the Winter forecast), citing slower-than-expected activity, higher inflation and fragile business confidence.
• Tariff risks compound these challenges, with construction output 3 times more volatile than the UK economy overall.

Impact

Increased costs and consumer inflation

• Tariffs on imported goods, such as electronics, clothing, and furniture have increased retail prices, making everyday essentials more expensive for consumers.
• Lower-income households in the US are expected to be hit the hardest – those earning £22,580–£45,160 are expected to lose ~4% of their disposable income, compared to just 1.6% for the wealthiest households.

Disruption in supply chains and business continuity

• High tariffs have disrupted business operations, forcing companies to suspend cross-border shipments and end supplier relationships in countries, such as China. For example, Nike reduced China exposure to mitigate tariff and labour cost pressures while Crocs shifted 70% of production to Vietnam and Indonesia to stabilise margins.

Shift in product strategies and packaging choices

• Some consumer goods companies are changing how products are made and packaged to cope with rising costs. For example, companies like Coca-Cola are expected to use more plastic packaging to offset the 25% aluminium tariff.

Impact

Increased cost of solar panels for US renewable energy players

• Large-scale US renewable energy projects have faced rising costs due to steep Anti-Dumping and Countervailing duty (CVD) tariffs on solar components from Cambodia, Thailand, Malaysia, and Vietnam, alongside the April 2025 "Liberation Day" tariffs.
• This is expected to increase solar panel prices in the US by 20–40%.

Demand deficit for oil-exporting nations

• Key oil-exporting nations have experienced substantial impact from elevated tariffs:Iraq (39% tariff), Libya (31%), Algeria (30%), and Venezuela (15%).
• Emerging Asian markets, expected to drive 60% of global oil demand growth, may see oil importsslow down due to rising tariffs.

Volatile crude oil prices are leading to supply chain concerns

• Crude oil markets in 2025 have become highly volatile, driven by Middle eastern geopolitical tensions, such as the Iran-Israel conflict and trade policies. Prices are fluctuating, disrupting global supply chains and energy stability.
• The uncertainty of US tariff policy emerged as a key driver of price declines, triggering a widespread market downturn.

Impact

Reduced shipments and port activity

• US tariffs have led to a significant reduction in cargo volumes at major ports, resulting in reduced shifts, layoffs, and financial strain for dockworkers and logistics firms dependent on port activities.
• Shipping at the Port of Los Angeles dropped by ~50%, significantly reducing port jobs and regional economic activity.
• In April 2025, Hapag-Lloyd, a shipping company, reported a 30% cancellation for US-China shipments.

Increased shipping and operational costs

• Tariffs have directly increased shipping and transportation expenses by adding extra charges to goods entering or leaving the US.
• To avoid tariffs, many carriers are rerouting shipments through alternative countries, causing delays and complicating supply chain.
  

Impact

Strategic realignment of supply chains

• US tariffs on technology products have started eroding the cost advantage of the "Made in China" model, forcing companies to reassess sourcing and pricing strategies.
• This, combined with the CHIPS and Science Act, has driven a surge in domestic manufacturing investments, reshaping global electronics supply chains toward US-centric production models.

Electronics tariffs are increasing cost pressures and trade volatility

• Despite selective exemptions, critical electronic parts – such as Printed Circuit Boards (PCBs) and Printed Circuit Board Assemblies (PCBAs)–remain highly vulnerable to tariffs. These measures are expected to impose an annual cost >£752.7 million on US semiconductor equipment manufacturers.
• Anticipation of a potential 25% tariff has already impacted trade flows, with semiconductor imports to the US dropping 11.7% and cell phone imports plunging 28.6% between March and April 2025, signalling heightened import sensitivity and supply chain caution.