Trump's tariffs hit American small businesses hardest: Report
Trump's tariff policy is placing a heavy burden on US small businesses, with new levies up to 41% threatening closures, job losses, and long-term economic decline.
-
President Donald Trump visits the Federal Reserve during renovations, Thursday, July 24, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson)
As the Trump administration's aggressive tariff regime enters its latest phase, small businesses across the United States are facing significant challenges that could undermine key sectors of the US economy. The latest escalation, announced this week, imposes tariffs ranging from 15% to 41% on goods from more than 60 countries, set to take effect August 7.
Why small businesses bear the brunt
Earl Rasmussen, owner and president of the Kaleidoscope Group consulting firm, warns that the new tariffs will trigger widespread small business closures. "Additional costs will likely be passed to the customers and will, unfortunately, result in the closure of many small businesses," Rasmussen told RIA Novosti. He added, "This is a very poor decision which will directly impact US consumers and businesses and will likely further alienate the US from global trade."
These tariffs follow months of escalating trade tensions that began with Trump's April executive order imposing 10% baseline "reciprocal" tariffs on imports, with higher rates for 57 countries. Despite more than 75 countries seeking negotiations rather than retaliation, the administration has pressed forward with its protectionist agenda.
The "Tariff Tax"
The impact on small businesses is particularly significant, as they represent 99.9% of all US businesses, employ 59 million Americans, 45.9% of the private workforce, and contribute 43.5% of the nation's GDP.
What US President Donald Trump describes as protective measures are, for small businesses, experienced as crushing tax increases. Small businesses, unlike large corporations, often lack the financial reserves to absorb these costs.
Seven ways tariffs affect entrepreneurs
Analysis of the tariff impact reveals seven ways these policies are harming small businesses:
- Increased input costs.
- Supply chain disruptions: Limited infrastructure makes it hard for small businesses to shift suppliers.
- Price pressures: Firms must choose between raising prices and losing customers or absorbing costs and sacrificing profits.
- Cash flow Constraints: Tariffs are payable upon import, straining already tight cash flows.
- Investment uncertainty: Tariff volatility discourages long-term planning.
- Competitive disadvantage: Large corporations can lobby for exemptions; small businesses cannot.
- Retaliatory impact: Counter-tariffs harm small exporters' competitiveness abroad.
The manufacturing paradox
Despite the administration’s stated intent to bolster domestic manufacturing, early indicators show the opposite effect. The US manufacturing sector lost 14,000 net jobs in May and June 2025. Job openings in the sector have fallen by nearly 100,000 since Trump took office.
Who really pays for tariffs?
Despite claims that foreign countries pay tariffs, the reality seems to be different. Tariffs are paid by importing companies, and the revenue goes directly to the US Treasury. As the New York Times notes, if Walmart imports shoes from Vietnam at a 20% tariff, it owes $20 to the US government on a $100 pair. Small businesses, lacking the leverage of major retailers, must often pass these costs to customers, undermining the claim that foreign nations bear the burden.
Strategies small businesses are using to survive
Despite the challenges, some businesses are adapting. For example, some are diversifying their supply chain, shifting to domestic or alternative suppliers. Others are streamlining processes to reduce costs. Additionally, some preferred to transparently explain price increases to their customers. Some have also decided to secure credit to manage tariff-related cash flow disruptions.
As Rasmussen warns, while all companies are affected, small businesses face the most severe challenges. Instead of boosting domestic manufacturing or shrinking trade deficits, current evidence suggests that the tariff policy is disproportionately hurting small enterprises.