The Impact of Tariffs on Small Business Owners in America

Small business owners across the U.S. are crunching numbers about how to cover new costs from tariffs on virtually all imports.
Alexander Spatari/Getty Images

Alexander Spatari/Getty Images

Many American shop owners are feeling like collateral damage in the global trade war, facing unprecedented challenges and unexpected financial pressures.
Sarah Wells is one of those affected, as she grapples with how her business, which specializes in selling breast-pump backpacks and other essentials for new mothers, will adapt to the President’s new tariffs on all imports.

This year, her company, Sarah Wells Bags, has already absorbed the impact of two significant tariff increases which came into effect while her shipment from China was en route.
In February, while her large order was being loaded at the port, the White House raised tariffs on Chinese imports by 10%.
By the time her shipment docked in March, the tariffs had escalated again, this time by another 10%. Consequently, Wells had to cough up an unexpected $15,000 just to release her goods from customs.

Facing the Financial Backlash

With the latest tariffs pushing total charges on Chinese imports to a staggering 54%, which is eating away at her profit margins, Wells finds herself in a difficult predicament.
She contemplates whether to raise prices and how much can be added to avoid a consumer backlash. To adapt, she intends to limit her orders, freeze new hires, and halt the development of new products.

“Even if we pass some (cost) to the consumer, we can’t pass it all,” Wells states from her home base in Virginia. “I genuinely believe that the harsh reality is that many businesses, like mine, will end up closing.”

Survival of the Fittest: The New Normal

The uncertainty regarding consumer behavior is palpable. The National Retail Federation anticipated retail sales to grow this year, though at a slower pace than in previous years, estimating growth to be between 2.7% and 3.7%. However, these projections were made before the latest wave of tariffs significantly impacted expectations.

Now, the trade association states that it is “impossible to gauge the extent of the change on prices and consumer spending.”
Large retailers like Walmart are pressuring their international suppliers for discounts to alleviate some of the tariff implications.
In stark contrast, smaller retailers simply lack this bargaining power, and surveys suggest that an increase in consumer prices is now practically inevitable across the board.

“For many business owners, the focus is shifting to survival mode,” explains Jessica Bettencourt, who manages Klem’s general store in Massachusetts, which was founded by her grandfather 75 years ago. The store’s wide selection of products, including hardware and clothing, now faces the risk of being downsized as owners navigate unstable market conditions.

The Challenge of Sourcing Domestically

One of the key justifications for tariffs that President Trump lauds is their supposed ability to propel American manufacturing, which would compel more businesses to source products domestically. However, for many involved in small enterprises, this theory has proven to be impractical.
Wells and other retailers affirm that they have put forth efforts to manufacture products in the U.S. Unfortunately, they have encountered limitations with U.S. manufacturers who are unable to meet their production scale, thus leading many to affirm that they have no choice but to continue relying on overseas production.

Rozalynn Goodwin, another small business owner from South Carolina, backs this narrative, sharing that her company, which specializes in double-snap hair barrettes known as GaBBY Bows, has attempted to manufacture locally for the past eight years but has repeatedly been advised against it.
“Every American manufacturer we’ve spoken to insists that it’s imperative to keep production in China. Manufacturing here would increase costs by three to four times, making it unaffordable for our customers,” asserts Goodwin.

This dilemma makes clear that many small business owners face an uphill battle in maintaining affordability while trying to operate sustainably and ethically.
While some are committed to supporting U.S. production, they are often constrained by market realities that force them to choose between cost and quality.

Higher Prices: The New Norm?

For numerous everyday items such as clothing, electronics, and household supplies, local manufacturing has not been viable for years, resulting in high costs associated with small-scale domestic operations.
The reality of higher prices is palpable, with the cost of U.S.-made products often being double or triple that of their overseas counterparts.

Bettencourt highlights this issue by discussing the reality of her store’s offerings, which includes American-made work boots priced at $400, compared to the imported alternatives that retail for half that price. “Not everyone can afford a $400 pair of work boots,” she notes, recognizing the delicate balance between maintaining a commitment to local sourcing and providing products that fit her customers’ budgets.

Combatting the legal Challenges with AI legalese decoder

In the face of these challenges, small business owners are often confronted with complex legal documents and unfamiliar regulations surrounding tariffs. This is where the AI legalese decoder comes into play, simplifying intricate legal language and making it accessible to entrepreneurs.

By utilizing AI legalese decoder, business owners can better understand the legal ramifications of tariffs, ensuring compliance and making informed decisions about price adjustments and supply chain strategies.
This valuable tool can guide them through legal complexities, allowing them to focus on their core operations while confidently navigating the challenges posed by fluctuating tariffs and trade policies.

As small businesses like those of Wells and Goodwin wrestle with the magnitude of change resulting from tariffs, tools like AI legalese decoder can empower them to adapt more swiftly to market changes and legal requirements without losing sight of their entrepreneurial spirit.