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April 11, 2025
How Can Small Businesses Best Deal With Ongoing Tariffs?
Small business owners in the United States appear to be wrestling with the ongoing tariffs instituted by President Donald Trump, with many profiled by FOX Business and The Guardian indicating various degrees of anxiety and distress.
FOX quoted Pinar Cebi Wilber, chief economist at the American Council for Capital Formation, speaking to the nature of tariff impacts on American small business operations. Pointing to smaller profit margins being common to small businesses, Wilber suggested that these enterprises will be the “first ones to cave under any sign of recession.”
“As their size indicates, they do not have the same market power as their larger counterparts, so whenever their costs increase, it is harder for them to bargain with their suppliers. Ultimately, they will have to pass that cost to their customers,” Wilber told FOX Business. “This decreases their competitiveness vis-a-vis the larger businesses.”
US Small Business Owners Speak Out on Tariff Troubles
FOX spoke to Alfred Mai, founder of San Francisco-based card game company ASM Games, who said the sudden institution of significant tariffs — which he described as the most “brutal tax hike on American small businesses and consumers” he’s ever witnessed — cut deeply into his already strained profit margins.
“At least with normal taxes, you get notice — you can plan. This came out of nowhere, and small businesses like mine, with tight margins and tight cash flow, are going to get crushed,” Mai said.
Sarah Wells, founder of Sarah Wells Bags, was next to be profiled by FOX. She told the news outlet that her business — started in 2013, providing functional breast pump bags for mothers — imports largely from China. Current levies of 145% against Chinese imports are in place following a tit-for-tat retaliatory trade dispute between the U.S. and China.
Wells has since curtailed ordering and raised prices, despite shouldering shrinking margins in earlier days. She further indicated an inability to source a U.S.-based supplier.
“I have absolutely no loyalty to manufacturing in China. I would love to have my manufacturing in my own backyard here,” Wells said.
“I have never been able to find a handbag manufacturer that can produce the raw materials and do the final assembly at the mass production scale that I’ve been so lucky to succeed for with my business size,” she added, noting that she’d need to import materials from 14 other foreign manufacturers even if she could locate an assembly solution stateside.
Finally, The Guardian detailed the case of Beth Benike, a Minnesota veteran who founded Busy Baby, which produces baby-related products. Benike had budgeted ahead of time for Trump’s tariffs but grew alarmed when they grew from 10% to 54%, and then to 104% and beyond.
“After today’s announcement, and the impending 104% tariff, I am abandoning my products in China. I am leaving them there because I simply cannot afford to ship them here,” Benike told her social media followers on April 7, prior to the president hiking the tariffs related to Chinese imports even higher two days later. She told The Guardian that she was considering options to either sell this stock (worth around $160,000) overseas or reroute it through other nations for delivery.
Small Business Administration Faces Significant Cuts, but SBA Brass Say ‘Historic Opportunity’ Awaits
Further complicating matters: The Trump administration reportedly plans to follow through with substantial cuts to the Small Business Administration (SBA), as Politico reported, slashing 43% of its employees, amounting to around 2,700 workers.
The Trump administration is primarily targeting staff administering long-term Covid-era loans at the SBA, as well as staff at the Community Development Financial Institutions Fund, per Politico. The administration has already scrapped the Commerce Department’s Minority Business Development Agency.
Molly Day, the National Small Business Association’s vice president of public affairs, spoke to the current state of affairs.
“Whether or not you support tariffs, or whether or not you think certain offices should be cut, I think overall, any kind of economic turbulence is uniquely burdensome for small businesses,” Day said.
However, SBA Administrator Kelly Loeffler recently pointed to the planned extension of the 2017 Tax Cuts and Jobs Act as helping U.S. small businesses “tremendously” — and Caitlin O’Dea, head of communications at SBA, backed the president’s strategy in unambiguous terms.
“The SBA fully supports President Trump’s efforts to restore fair trade, which will bring back American jobs and revitalize American industry, empowering entrepreneurs with the level playing field to compete and win,” O’Dea said.
“Combined with SBA’s new manufacturing initiative, including our effort to cut $100 billion in red tape, this administration will unleash historic opportunity for small businesses and workers alike,” she added.
Discussion Questions
Will the Trump administration’s plan to extend the 2017 Tax Cuts and Jobs Act sufficiently counterbalance the effect of tariffs on U.S. small businesses?
How can American small business owners best navigate the ongoing tariff situation? Are there any pieces of advice that small or independent retailers should take note of in order to succeed/survive?
Are there any unique levers available to independent or small businesses that may not be commonly known? What last-ditch effort(s) might be worth the risk if the tariff burden becomes too great to bear?
Poll
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Brad Halverson
Principal, Clearbrand CX
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Bob Amster
Principal, Retail Technology Group
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This is a very broad question because there is no such thing as a typical small business; they and their situations are all different. Some wholesale, some sell directly, some source from overseas, some source domestically, and so forth. What unites them is that tariffs will ultimately push up costs for all. Those sourcing from overseas will be most heavily impacted, and at some of the rates proposed, there is no way they can simply absorb the costs. If they wholesale, they will need to renegotiate prices with partners. If they sell directly, they will need to raise prices for consumers. All of this is disruptive. Some businesses will adapt. Others may fold or simply give up.
“Will the Trump administration’s plan to extend the 2017 Tax Cuts and Jobs Act sufficiently counterbalance the effect of tariffs on US small businesses?”
On this specifically: no, and why would they? These cuts are already in place. It’s good they’re being extended but they’re not an offset for new tariffs. And the amount saved by the TCJA pales into comparison with the burden of tariffs. This is like re-giving something that has already been given with one hand, and taking a huge pile of cash with the other.
Echo that sentiment.
I suppose a case can be made for “giving both sides equal time”, but personally I find the blather of the SBA to be more of an insult than useful. Even if we assume – charitably IMO! – there’re some benefits, they’re hardly likely to me matched up at the individual level
There are no grants to deal with tariffs. These tariffs were a 9/11 to Retail. Petty, childish, with no strategy or care for the consequences. This is going do far worse than Covid ever did to smaller shops. Unless of course he changes his mind tomorrow which could easily happen and then change back. Business hates Folly like this
I was referring to (possible) benefits from the extension of the tax plans, not to the tarriffs.
The extension of the 2017 Tax Cuts and Jobs Act may provide some relief to small businesses by reducing their tax liabilities, but tariffs may still add to the cost of imported goods and materials.
It is possible that this will lead to higher expenses for businesses that are reliant on imports, potentially negating the benefits of tax cuts. It will ultimately depend on the industry and supply chain dependences of each small business whether the tax cuts are effective in counterbalancing tariffs.
Diversifying a small business’s supply chain to include domestic suppliers or countries with lower tariffs is a good idea. In addition, negotiating better terms with existing suppliers or exploring bulk purchasing options can reduce costs.
In addition, staying informed about trade policies and seeking assistance from trade associations can provide valuable insight and assistance when navigating the tariff environment.
Grants and subsidies specifically designed to mitigate tariff impacts are available to small businesses. Additionally, small businesses can join cooperative buying groups, which allow them to pool resources and increase their purchasing power, potentially resulting in better deals with suppliers.
Using technology platforms that offer real-time tariff tracking and analytics can also assist businesses in making more informed decisions regarding their sourcing strategies.
One of the things small businesses and retailers should do regardless of tariff burdens and retail price impacts, is communicate with customers frequently and openly. Maintain control of your business narrative by sharing what you are doing about this before mainstream media takes over, possibly scaring your shoppers.
Provide signage in store, video clips in social media about what products are impacted, and any discounts you may be taking in margin while retail prices are higher. In addition, tell customers what alternative or non-tariffed products you offer, and how you are helping maintain a sense of choice during global price spikes.
One of the best at communicating during supply chain issues, shortages or price spikes is small grocer Stew Leonards. They behave and execute with an offensive mindset, communicating with their most loyal customers honestly, showing how they are making good decisions for the long-term.
There is no “best” way for small businesses to cope with the newly-imposed tariffs. Small businesses do not have access to capital to have bought excess inventory ahead of the tariff dates. Small businesses will pass the increased costs onto the consumer and, in many cases, sales volumes will shrink because, if their products are discretionary purchases, consumers will opt to not buy them at the new, higher prices. One small business owner indicated that he also fears that tourism will be down from previous years indirectly due to the tariffs, and that will also negatively affect sales.
Cut to the chase. Many small business owners are highly leveraged, and any preplanning they have done could not have anticipated the level of tariffs currently in the pipeline. They may lose not only their business but their homes and we will lose some favorite neighborhood businesses. Santa better start planning now.
When more and more real life stories come to light, the sheer lunacy of this whole tariff scenario will finally be known.
Many small businesses are still reeling from the pandemic and inflation. Tariffs will set them back even further.
In response to the uncertainty and complexity of tariffs, small businesses can:
This decade, companies are being forced to change their habits. The threat of tariffs can motivate small businesses to become more efficient and resilient.
Slam dunk tariffs are going to cause slam dunk bankruptcies. Period. Full stop. And it’s ridiculous to suggest that tax cuts will help mitigate the problem. I can’t be the only person who read stories today about shipments landing for $X but now accompanied by required tariff payments of $X+++. Tariff payments the brand or retailer doesn’t remotely have the cash to pay. And even if they had it, paying it would put them out of business.
How about 10 of these scenarios getting national attention and sent to the desk of the guy that keeps saying the originating country pays the tariffs? How about that guy and his billionaire buddies explain to everybody how they are going to deal with what is about to be a wave of small business bankruptcies? And for the big businesses that supposedly have the bandwidth to deal with this, let’s see what happens when/if we ever have enough clarity that they can maybe project margins and earnings again.
100% yes to everything you just mentioned! I will add that the constant dream beat of “diversifying your supply chain and anchoring production” may sound like an elegant solution, but it ignores the facts and realities of today’s manufacturing and sourcing environment. There are many materials across many product segments that simply cannot be sourced effectively or economically within the US to fully avoid these tariffs. That ship sailed many decades ago and is not coming back! I read one example of an apparel brand that currently produces their apparel in the US in NJ and Los Angeles. However, even before tariff announcements, they were unable to source many of the fabrics used domestically (specifically they cited that there is only one source for wool suiting fabric for men’s suits in the US that does not have the capacity to be a sole supplier for any brand at large scale production – which means importing fabrics). The situation will not be improved for them due to tariffs because none of the suppliers they use will be moving their fabric production to the US.
For that matter, let’s think about some apparel categories, where the appeal for many consumers is that the materials are from Italy, or were made in Paris, and so on. Would those items (and I don’t mean exclusively luxury apparel) be as appealing to consumers if they were fully domestic? I don’t believe so.