Innovation in the UK – the impact of US tariffs

The US administration’s decisions over the last few days, firstly with the imposition of tariffs on almost all of its global trading partners, followed by the temporary respite given the 90-day pause on the higher level of tariffs imposed on most countries, has caused turmoil in the global markets.

UK brands, innovators and investors are undoubtedly feeling nervous about the future.

Notwithstanding the US administration’s u-turn on the most punitive levels of tariffs, most countries (including the UK) still face a 10% tariff on goods and raw materials exported to the US, and this will have a knock-on effect on US businesses and consumers.

The UK has long enjoyed a close trading relationship with the US, and the two countries have been well placed to capitalise on this to encourage the sharing of ideas, facilities, materials and resources, in order to stay at the forefront of innovation. The UK has various research funding programmes which specifically encourage US-UK collaboration, and there are strong and long standing inter-institutional links between the two countries.

However, US research institutions will now be looking closely at their own research programmes, particularly those in the near future pipeline, to consider whether collaboration outside the US remains feasible. The cost of importing equipment and materials for vital research might make some research programmes unviable leading to their cancellation. This will clearly affect UK research institutions and research-intensive businesses reliant on their US counterparts to continue important research projects.

Over the last few days, Kier Starmer has made promises to protect the UK economy from the impact of the tariffs. Although much of the detail is yet to be decided, within the last 24 hours, the government has specifically pledged a £600m investment (co-funded by Wellcome Trust) in medical research, including the development of a new Health Data Research Service. Clinical trials will also be fast-tracked to accelerate the development of the medicines and therapies of the future, with the current time it takes to get a clinical trial set up cut to 150 days by March 2026.

In announcing the new funding, the government states that its intention behind the funding is to make the UK the best place in the world to invest in medical research. We anticipate that this will encourage international collaboration with UK institutions and life sciences companies. Countries such as India – itself home to companies and institutions at the forefront of research in pharmaceuticals – may look to form ties strong ties to the UK, making both countries less reliant on US innovation in this field.

Other sectors, including green energy, automotive and space research are also set to receive a share of £14bn in research and development funding announced by the UK government last week, and these important sectors may be key to fostering close ties with other countries, which may ultimately guard against the impact of the US tariffs as we enter an uncertain economic territory.