U.S. Small Businesses Grapple with New Tariff Costs
In the wake of new tariffs affecting nearly all imports, many American small business owners find themselves in a precarious situation as they try to navigate increased costs. This economic landscape has left them feeling like unintended casualties in the broader global trade conflict.
Sarah Wells, who has been in business for 13 years selling breast-pump backpacks and other products for new mothers, is one such entrepreneur facing these challenges. The new tariffs introduced by President Trump have posed significant hurdles for her company, Sarah Wells Bags.
Throughout this year, her business has encountered the impact of two rounds of tariffs that coincided with a shipment from China in transit. A shipment that left port in February was subject to a 10% tariff increase on Chinese imports, and by the time it reached the U.S. in March, tariffs had climbed an additional 10%, forcing Wells to pay an unexpected $15,000 to clear customs.
As the most recent tariff increase pushed the total on Chinese imports to 54%, Wells is confronting the possibility of having to raise prices. She is also considering ordering fewer products, halting hiring, and pausing new product development in response to the shrinking profit margins.
“Even if we pass some (cost) to the consumer, we can’t pass it all,” says Wells, based in Virginia. “So I really think the honest answer is that businesses will close.”
For Some, It’s Survival Mode
The retail sector is uncertain about how consumers will react to price increases. The National Retail Federation had anticipated retail sales growth between 2.7% and 3.7% this year, but the forecast was made before the full scope of the tariffs was understood. Now, the trade association states that it’s “impossible to predict … the magnitude of change on prices and on consumer spending.”
While major retailers like Walmart are attempting to negotiate discounts with foreign suppliers to mitigate tariff impacts, smaller stores lack the leverage to do the same. As a result, many are contemplating strategies to scale back their operations, such as reducing product selections, freezing hiring, and cutting back on advertising or product development.
Jessica Bettencourt, who heads Klem’s general store in Massachusetts, echoes this sentiment. With the store offering a diverse array of products, she is assessing what items are essential versus those that are not, as part of a broader strategy to endure the economic strain.
Challenges in Domestic Manufacturing
President Trump argues that tariffs will encourage domestic manufacturing by compelling companies to source products locally. However, small business owners like Wells and Bettencourt have found that domestic manufacturing isn’t a feasible option due to scale limitations and costs.
Wells explored producing her backpacks and purses in the U.S., but found that manufacturers couldn’t handle the volume required, and raw materials would still need to be imported from China.
Similarly, Rozalynn Goodwin, a South Carolina business owner, encountered obstacles in her efforts to manufacture her double-snap hair barrettes, GaBBY Bows, domestically. “Every manufacturer in the United States we’ve spoken to has told us, ‘You need to continue making this in China. It’s going to cost you three to four times more to make it here,'” Goodwin says. “Our customers will not pay $8 or $10 more for this product.”
The Cost of American-Made Products
In many sectors, the U.S. has not produced goods like clothes, shoes, toys, and electronics on a large scale for years. Smaller-scale operations often have significantly higher costs, requiring imported materials. This makes American-made products more expensive, as Bettencourt notes with her store’s $400 American-made work boots, which are double the price of imported options.
“Not everyone can buy a $400 pair of work boots,” she remarks. “So I do want to always look at that U.S.-made product first, but I also have to offer my customers what they can afford.”
Small business owners are feeling the pressure as they lose the ability to make independent decisions due to the overarching impact of the tariffs.
