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The Economic Toll of Trade Policies on Small Businesses

Recent economic analysis has brought to light the considerable impact of the Trump administration’s trade policies on small businesses across Main Street America. Since April 2025, small-business importers have shouldered an additional burden of approximately $25,000 each month due to skyrocketing tariff costs. This analysis, released on December 17 by the Center for American Progress (CAP)—a progressive think tank—highlights a chaotic trading environment coupled with the removal of vital import exemptions, leading to a financial crisis for entrepreneurs during a season that is typically crucial for retail.

Rising Tariffs and Their Economic Consequences

The analysis conducted by experts Michael Negron and Mimla Wardak indicates that the administration’s “Liberation Day” tariff announcement has resulted in an unprecedented rise in duties collected from American businesses. From April through September 2025, the CAP estimated that around 236,000 small-business importers across the United States were burdened with an average of over $151,000 in additional tariffs compared to the equivalent period in 2024. According to the centrist Chamber of Commerce, this information underscores the strain on the small-business importer sector, which is vital for maintaining economic diversity and job creation.

Negron stated, “The Trump administration’s broad, costly, and frequently shifting policies threaten to undermine one of the strongest engines of the American economy.” He continued, emphasizing that a time usually filled with opportunities for small businesses has instead devolved into a state of uncertainty.

The Struggles of Mom-and-Pop Businesses

These burdens are not confined to larger enterprises. The report reveals that small “mom-and-pop” businesses—defined as those employing fewer than 50 individuals—have experienced an average increase of over $86,000 in costs during the six-month assessment period, compared to the previous year. The projections for the near future appear bleak: CAP anticipates that if the existing monthly expenses continue unabated, the average small business will see their tariff bill exceed $500,000 by 2026. This reality may lead to more layoffs, business bankruptcies, and stunted investments. As CAP aptly summarizes, the tariffs have become a “costly lump of coal” for American small businesses’ holiday aspirations.

Administrative Red Tape and Its Stifling Effect

In addition to the financial strain, small business owners are grappling with an unexpected surge in bureaucratic red tape. The Trump administration’s decision to eliminate the de minimis exemption—which previously allowed low-value shipments to enter the U.S. without incurring duties or extensive paperwork—has compounded these challenges. Entrepreneurs now face the daunting task of prepaying new tariff rates and navigating complex customs forms for millions of shipments that used to enjoy exemption status.

Jyoti Jaiswal, founder of OMSutra, a thriving small business selling sustainable fashion and home goods, expressed the profound ramifications of these changes. She noted that her business is now required to consolidate shipments and allocate more capital upfront, leading to an increase in administrative tasks related to tariffs. Jaiswal reported that the time spent on tariff-related paperwork per shipment has jumped from eight to ten hours to a staggering ten to fifteen hours, constraining her capacity to pass on costs to consumers without losing competitive advantage.

Similarly, Legrand Lindor, CEO of LMI Textiles, shared with CAP that his medical supply company transitioned from spending virtually no time on tariff documentation to dedicating four to five hours per transaction. With a whopping 20% hike in product costs—equating to approximately $80,000 in additional expenditures—Lindor found himself forced to abandon plans for a new warehouse in 2025.

Labor Market Effects of Rising Costs

The escalating costs and bureaucratic challenges have a chilling effect on the labor market for small firms. Data from payroll provider ADP indicates that businesses with fewer than 50 employees laid off a staggering 120,000 workers in November 2025, marking the highest rate of small-business layoffs in the past five years.

Contrary to the administration’s claims that foreign nations would bear the cost of these tariffs, the report asserts that the financial brunt falls squarely on American importers. Goldman Sachs calculated that, by August 2025, American businesses had absorbed 51% of the tariff costs, even while passing 37% on to consumers through inflated prices. A subsequent survey by Small Business Majority indicated that 74% of small business owners reported concerns about their businesses’ survival over the upcoming twelve months.

Compounding Financial Pressures Facing Small Business

The tariff crisis compounds an array of other financial challenges. The report stresses that the anticipated expiration of enhanced Affordable Care Act premium tax credits in 2026 threatens to double insurance premiums for millions of entrepreneurs and their employees.

Typically, the holiday season accounts for at least 25% of annual revenue for retailers. However, the dual pressures of high tariffs and complex administrative requirements have created what CAP describes as “a decidedly unhappy holiday season” for the nation’s 236,000 small business importers. If policy changes don’t occur soon, these businesses face a future marked by escalating costs and diminished investment prospects as they enter the new year.

How AI legalese decoder Can Assist Struggling Entrepreneurs

During these tumultuous times, navigating the myriad legal and bureaucratic hurdles posed by these trade policies can be daunting for small business owners. Here, the AI legalese decoder can play a crucial role. By parsing complex legal language and transforming it into simple, comprehensible terms, this tool empowers small business owners to better understand their obligations and rights under the current trading landscape.

For instance, using AI legalese decoder, entrepreneurs can quickly decipher customs regulations, tariff impositions, and compliance requirements, enabling them to navigate the changing landscape without getting bogged down by legal jargon. The decoder serves as a valuable resource that can help mitigate the overwhelming administrative red tape, allowing small-business owners to focus their efforts on innovation and growth rather than getting lost in paperwork.

In summary, while the challenges presented by current trade policies and economic conditions are substantial, tools like AI legalese decoder can provide small business owners with the necessary guidance to adapt and persevere during these trying times.

For this story, journalists from Fortune utilized generative AI as a research tool, and all information was verified by an editor prior to publication.

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