Trump’s tariffs threaten the future of innovation – and UK tech could be collateral damage
- Written by Matthew Allen, Lecturer in Economics, Salford Business School, University of Salford
US president Donald Trump’s 15% baseline tariffs on EU imports may read like a throwback to old-school protectionism, designed to safeguard American jobs and manufacturing. But in today’s globalised and digitally driven economy, the risk isn’t just to steel or car factories, it’s to innovation itself.
The world’s most advanced technologies rely on complex, deeply integrated supply chains[1]. Evidence from 2023[2] shows that even temporary US tariff shocks disrupted relationships between firms. And these tariffs won’t just hit the EU. They will disrupt the high-value tech ecosystems of partners like the UK – especially firms contributing to artificial intelligence (AI), semiconductor design and cybersecurity.
These industries underpin national resilience, data security and the competitiveness of advanced economies. For the UK, which often positions itself as a global innovation hub post-Brexit, the fallout could be significant.
Take ARM Holdings, the Cambridge-based semiconductor giant whose chip designs power 99% of the world’s smartphones[3] and an increasing share of AI infrastructure.
ARM doesn’t manufacture chips itself. Instead, it licenses its architecture to firms like Apple, Nvidia and Qualcomm. That makes it a prime example of the UK’s value in the global innovation chain: high intellectual property (IP), low carbon footprint, huge reach.
ARM’s position as a vital link in the supply chain underlines another point. Trade policy aimed at traditional manufacturing sectors can inadvertently destabilise tech-intensive, IP-led sectors like semiconductors and software. This is echoed in research[4] examining global tariff spillovers on tech competitiveness.
If tariffs are applied to components or design work linked to traded goods that cross EU or UK borders en route to US manufacturers, it introduces a layer of risk and cost to innovative firms and their global partners.
Even if a company’s work isn’t directly taxed, the uncertainty and red tape may make US firms think twice about sourcing from outside US jurisdictions. While Trump might present that as a victory for American manufacturing, in reality it could raise costs for US producers, damage innovation and make US firms less competitive in the industries he aims to protect.
It’s not just the giants at risk. In the UK, Cambridge’s wider tech cluster, sometimes called “Silicon Fen”, is home to dozens of ambitious AI firms[5]. With operations spanning the UK, EU and US, companies like this depend on fast, flexible and trusted international partnerships to develop, deploy and refine their products. Tariff-related disruptions make collaboration harder at a time when speed is a competitive advantage.
This is not hypothetical. Tariffs reduce access to large markets – and when markets shrink, firms reduce investment[6] in research and innovation.
Trump’s broader narrative suggests tariffs can bring back jobs and restore industrial power to the US. But innovation doesn’t work like that. A semiconductor isn’t made in one place. A cybersecurity system isn’t built by a single team. These are networked, iterative processes, involving researchers, suppliers, data centres and talent pools across continents. Disrupt that flow and you slow progress.
The UK is especially exposed because of its unique post-Brexit positioning. It trades independently from the EU but is still tightly intertwined with it, particularly in tech sectors.
Many UK firms use EU distribution centres to reach the US market or collaborate with EU partners on joint projects involving data, hardware or software This reflects the fact that the UK remains tightly integrated into European supply and value chains – exporting £358 billion[7] of goods and services to the EU in 2024 alone. Tariffs targeting the EU could easily catch UK-originated components or design work as collateral damage.
Modelling has shown[8] that Trump’s proposed tariffs could reduce EU-US trade volumes across multiple sectors, particularly in tech, where integrated production routes are standard.
Small and medium-sized enterprises and startups may find themselves most vulnerable. These firms typically can’t absorb sudden cost increases or legal complexities. Nor can they easily switch suppliers or reroute through different customs zones.
If you’re an early-stage AI company relying on a specific chip from Germany and a US cloud partner to train your model, a 15% tariff adds months of delays and thousands of pounds in costs, just to maintain the status quo.
From a policy perspective, the impact goes deeper. The UK government has championed sectors like AI[10], fintech[11] and clean tech[12] as pillars of economic growth. But these industries are only as strong as the networks that sustain them. If global fragmentation accelerates, the UK risks losing its role as a bridge between the US and the EU.
Meanwhile, countries like China[13] continue to invest heavily in consolidating their innovation supply chains, from chip manufacturing to AI research, particularly in efforts to secure domestic control over advanced technologies and semiconductors. This is something that the US and EU have only recently begun to coordinate on[14].
In the short term, Trump’s tariff strategy may boost US customs revenue, which is up US$50 billion[15] (£38 billion) a month by some estimates.
But this is not “free money”. These revenues are largely absorbed by businesses and ultimately passed on to consumers through higher prices, or to smaller suppliers through squeezed profit margins[16].
More fundamentally, it represents a belief that economic strength comes from protection rather than connection. But innovation has never worked that way. It thrives on collaboration, trust and scale. Tariffs may be politically effective, but economically they are the equivalent of building firewalls between teams that are supposed to be co-writing the future.
As the UK charts its post-Brexit global role, aligning itself with open, innovation-driven economies should be a priority. That means standing up for the integrity of global tech supply chains and recognising that disruption to one part of the system can reverberate far beyond its intended target.
References
- ^ supply chains (theconversation.com)
- ^ Evidence from 2023 (www.nber.org)
- ^ 99% of the world’s smartphones (investors.arm.com)
- ^ in research (www.aston.ac.uk)
- ^ AI firms (theconversation.com)
- ^ firms reduce investment (www.piie.com)
- ^ £358 billion (commonslibrary.parliament.uk)
- ^ Modelling has shown (www.lse.ac.uk)
- ^ Image courtesy of the White House/Blueee/Alamy (www.alamy.com)
- ^ championed sectors like AI (www.theguardian.com)
- ^ fintech (www.globalgovernmentfintech.com)
- ^ clean tech (www.gov.uk)
- ^ China (theconversation.com)
- ^ coordinate on (www.chathamhouse.org)
- ^ US$50 billion (theconversation.com)
- ^ profit margins (www.ft.com)
