Trump tariffs hurting small businesses US economy 2026

Trump Tariffs Are Hurting Small Businesses: What’s Happening on Main Street

May 16, 2026 Zara

Trump’s tariffs were meant to protect American business.

Some are paying the price.

Beth Benike runs Busy Baby, a small company in Minnesota that makes baby products. When Trump’s tariffs on Chinese imports hit 135% last year, she had inventory sitting in a factory in China that she could not afford to ship. She called the factory and cancelled the booking. For two months, she had nothing to sell.

‘It was like, now we’re a lost cause,’ she told NPR. ‘And then it went up even higher. And that’s when I hit the floor and just cried.’

Benike’s story is not unusual. Across the United States, Trump’s tariffs are hurting small businesses in ways that the administration’s original pitch, that foreign countries would pay the tariffs simply did not anticipate. The data tells a clear story: most of the cost has landed on American importers, and the smallest businesses have been hit hardest.

By the numbers:

Small business importers paid on average $306,000 more in tariffs in the year that ended in February 2026 according to the Center for American Progress.
In 2025 businesses with than 10 employees lost 292,000 jobs. This is 4.5 times jobs lost than during the pandemic says the US Joint Economic Committee.
A recent poll by the Center for American Progress found that 74% of business owners are worried, about being able to survive the next 12 months.
The Federal Reserve Bank of New York says that Americans paid 90% of Trumps tariffs, not countries.

The Promise vs The Reality

When Trump launched his ‘Liberation Day’ tariffs in April 2025, the White House framing was straightforward: foreign countries were cheating the US on trade, and tariffs would force them to pay their fair share. American manufacturers would benefit. Jobs would return.

The reality, according to the Federal Reserve Bank of New York, is that Americans paid for roughly 90% of the tariffs themselves, through higher prices on imported goods, passed along by importers who had no other option.

For large retailers like Walmart and Amazon, absorbing or passing on these costs is manageable. They have the scale, the supplier relationships, and the pricing power. For small businesses, the calculation is entirely different. By the end of 2024, according to Fortune’s analysis of Federal Reserve survey data, fewer than half of small businesses surveyed were profitable. They had already absorbed as much as they could and they had no reserves left to absorb more.

The Supreme Court ruled in February 2026 that the IEEPA-based ‘Liberation Day’ tariffs were illegal. Trump responded by imposing new Section 232 tariffs. As of May 2026, according to the Tax Foundation’s tariff tracker, the average effective US tariff rate stands at around 18% the highest since the 1930s, and a $1,500 average tax increase per US household.

The Real Stories Behind the Numbers

Numbers tell you the scale. People tell you what it actually feels like.

The Houston Toy Store

Daniel Rivera and Paulina Gamino run Misfit Toys, a small independent toy store in Houston. Toys are largely manufactured in China and Japan. Since Trump’s tariffs took effect, Rivera says he has been unable to afford to stock up for either the summer or Christmas seasons the two periods that account for most of a toy store’s annual revenue.

‘The big-box retailers will be fine,’ Rivera told NPR. ‘People go to Target, also for soap and drinks and food. And while they’re there, the kids will grab a toy. But here we will not be getting any of that summer action, any of that money.’

Toys that used to sell for $25 now cost up to $45. Gamino says raising prices is their only option but it is killing demand. ‘Mom-and-pop stores,’ she calls them. The scale problem is real: a 25% tariff that Walmart absorbs across its entire product range is a business-threatening cost for a store that sells only toys.

The Florida Water Filter Manufacturer

Guillermo Guzman’s company, H2O International in Deerfield Beach, Florida, makes water filtration products. He imports components now facing tariffs raising costs on products he sells domestically. But he is also getting hit from the other side: China retaliated with 125% tariffs on American imports, and his made-in-USA products were popular with affluent Chinese consumers.

‘At 125%, the orders stopped,’ he told Yahoo Finance. ‘We’re probably one of the few companies that imports to and from China, and we’re getting it coming and going.’

For many small business owners, the biggest problem is not even the tariff itself, it is the uncertainty. Pricing inventory becomes nearly impossible when trade policy changes every few months. Guzman, like hundreds of thousands of other small business owners, has been forced to reprice, reforecast, and re-explain to customers multiple times in a single year.

The Houston Rubber Track Company

Mohit Jagwani runs Rubber Track Wholesale in Houston selling rubber tracks for heavy machinery like excavators. His products are virtually all made in China, because that is where the rubber trees are. He has already raised prices 15% in anticipation of higher costs.

‘My sales are down from the time Trump took office,’ he said. ‘In a regular year, you buy what you need and you invest. But now we only have time to focus on inventory, to keep ourselves afloat.’

The critical point Jagwani makes is one that gets lost in the political debate about tariffs: even if he wanted to manufacture in the United States, ‘the materials are not produced here. So even if you were making the products here in the States, you would still be paying the tariffs on the raw goods to come in to actually produce that product.’

Winners and Losers: How Different Businesses Are Being Affected

Not every small business is suffering equally. The tariff impact depends heavily on your business model, your supply chain, and how quickly you can adapt. Here is an honest picture:

Business Type	Tariff Impact	What’s Happening	What They’re Doing
US Importers, toys electronics and apparel	🔴 Severe	$306K avg extra cost per year. Margins wiped. Many cutting orders.	Raising prices, reducing inventory, some closing
US Retailers, small independent stores	🔴 Severe	Cannot compete with Walmart/Amazon cost absorption. Footfall down.	Focusing on experience, loyalty, niche products
US Manufacturers, using imported components	🔴 High	Raw material inflation even if final product is ‘Made in USA’	Seeking domestic suppliers, raising prices
US Exporters (selling to China)	🟡 Medium	China retaliated — 125% tariff on US goods. Export orders fell sharply.	Diversifying to other markets: EU, Southeast Asia
E-commerce Sellers, Shopify and Amazon	🟡 Medium	Thinner margins, higher supplier costs, pressure to raise prices.	Raising prices, testing Vietnam/Mexico sourcing
Domestic-only Businesses, services and local	🟢 Lower	Some indirect inflation via energy, transport. Less direct impact.	Monitoring supplier costs carefully
US Manufacturers, competing with China imports	✅ Winners	Foreign competition now more expensive. New domestic interest.	Ramping up capacity, hiring
Agricultural Exporters, soy corn and wheat	🔴 Severe	China counter-tariffs cut demand sharply for US farm products.	Lobbying, seeking government support

Sources: Center for American Progress, NPR, Yahoo Finance, Joint Economic Committee report May 2026.

The Supply Chain Shift: China to Vietnam, Mexico, and Beyond

One of the most significant structural changes driven by trade war impact on American SMEs is an accelerating shift in global supply chains. Businesses that can move are moving away from China and toward lower-tariff alternatives.

Vietnam has emerged as the primary alternative for apparel, electronics assembly, and light manufacturing. Mexico, already benefiting from nearshoring driven by the broader US-China trade war has seen manufacturing investment surge. India is gaining traction in pharmaceuticals, textiles, and some electronics.

But for small businesses, this shift is harder than it sounds. As one CEO quoted in NPR noted: ‘The factories in Asia can just cut out the American business and sell directly online in the States, or directly to Amazon.’ When tariffs raise the cost of the American importer’s supply chain, it does not necessarily help American manufacturing, it can simply redirect trade flows and cut out the small business middleman entirely.

The supply chain story is part of a broader global manufacturing realignment that we have been tracking at TalkToGlobe read our analysis of how the global manufacturing shift is reshaping trade routes for the wider context.

What Smart Small Businesses Are Actually Doing Right Now

The businesses that are navigating this environment best share one characteristic: they stopped waiting for policy certainty and started building flexibility into their operations.

1. Diversifying Their Supplier Base

The businesses most exposed to tariff risk are those with single-source supply chains rooted in China. The smartest response is not necessarily moving everything out of China, it is adding Vietnam, Mexico, or India as secondary sources so you have options when policy shifts.

2. Repricing Transparently

Rather than absorbing costs silently or making customers feel surprised by price increases, the businesses handling this best are being direct. ‘We have to raise prices because of tariffs’ is a message that most customers understand and it builds trust rather than eroding it. NerdWallet’s guide to tariff impact on small businesses recommends communicating clearly with customers about why price changes are happening, emphasising product quality and uniqueness.

3. Applying for Tariff Refunds

This is the action most small business owners are not taking yet and they should be. Since April 21, 2026, businesses that paid tariffs under the now-illegal IEEPA provisions can apply for refunds through the CAPE (Consolidated Administration and Processing of Entries) system. If approved, refunds take 60-90 days. The process requires registering with CBP’s electronic payment system and submitting a declaration of goods.

For businesses that paid significant tariff costs in 2025, this refund process could represent meaningful cash recovery. Check with a customs broker or trade attorney for your specific situation.

4. Using AI Tools to Cut Other Costs

One finding from the Federal Reserve’s survey of small businesses is that a growing share are turning to AI productivity tools to offset rising input costs. If you cannot reduce what you pay for goods, reducing what you pay for operations, through AI-assisted customer service, accounting automation, and marketing tools, partially offsets the margin pressure.

The Bigger Picture: Is This Working?

The honest answer depends on your definition of ‘working.’

Some domestic manufacturers are seeing new interest. A tool-and-die manufacturer quoted in Yahoo Finance said the tariffs had ‘spurred new interest in his American-made products.’ One Japanese products importer said he managed to raise prices more than the tariff increase calling it ‘a win.’ These stories are real. They just represent about 23% of small businesses surveyed, according to Yahoo Finance data the minority.

The majority 77% are not winners. And economists broadly agree that higher tariffs reduce economic efficiency, raise consumer prices, and slow growth. The Tax Foundation estimates the current tariff regime represents the largest US tax increase as a percentage of GDP since 1993 with the costs falling disproportionately on households and small businesses rather than on the foreign countries the tariffs were meant to pressure.

The wider consequence is a reshaping of global trade architecture as we analyzed in our piece on how Russia’s sanctions evasion is accelerating alternatives to the US-led financial system, when the US uses economic levers as geopolitical tools, the long-term effect is often to accelerate the very diversification away from US-dependent systems that the policy was meant to prevent.

What Comes Next

For the 236,000 small business importers most directly affected by rising import costs for US businesses, the immediate priority is practical: apply for refunds where eligible, diversify supplier relationships where possible, and price transparently with customers.

The policy environment is unlikely to stabilise quickly. The Supreme Court struck down one set of tariffs; new ones replaced them almost immediately. The uncertainty arguably more damaging than the tariffs themselves for businesses trying to plan inventory and pricing is structural, not temporary.

The businesses that will come through this are not the ones waiting for policy clarity. They are the ones building supply chain flexibility, customer loyalty, and operational efficiency that make them resilient regardless of what trade policy does next. Follow TalkToGlobe for continuing coverage of how global trade shifts are reshaping business strategy.

Frequently Asked Questions

Are Trump’s tariffs hurting small businesses?

Yes, for most small businesses that import goods. According to the Center for American Progress, tariffs hurting US small businesses by adding an average of $306,000 in extra costs per small-business importer in the year ending February 2026. Monthly tariff payments tripled from early 2025 levels. The Joint Economic Committee reported 292,000 jobs lost at the smallest businesses in 2025, 4.5 times more than during the pandemic. About 74% of small business owners worry about surviving the next 12 months, per polling data.

Who is actually paying Trump’s tariffs?

American consumers and businesses not foreign countries, as the Trump administration claimed.Americans bore the brunt of Trump’s tariffs, paying for approximately 90% of them, according to the Federal Reserve Bank of New York. Initially, US importers absorbed these costs by accepting thinner profit margins, but they eventually passed the expense onto consumers in the form of higher prices. The Tax Foundation estimates that these tariffs resulted in an average tax increase of $1,500 per US household, marking the largest increase as a share of GDP since 1993.

What small businesses are being hurt the most by tariffs?

Small importers, particularly those dealing in toys, electronics, apparel, and consumer goods sourced heavily from China, face the most severe impact. This is because China retaliated with its own tariffs on US farm products, including soy, corn, and wheat, which in turn severely affected agricultural exporters. Concurrently, higher input costs hit small manufacturers that rely on imported components; this often leads to reduced demand for their products when prices inevitably rise. In contrast, businesses least affected by these trade tensions are purely domestic service businesses and domestic manufacturers that compete with Chinese imports.

Are there any small businesses benefiting from Trump’s tariffs?

Yes, about 23% of small businesses surveyed report positive effects. US domestic manufacturers competing with Chinese imports see less foreign competition. A tool-and-die manufacturer reported new interest in his American-made products. Some importers of non-Chinese goods have been able to raise prices above the tariff increase, capturing additional margin. Agricultural businesses in regions less dependent on Chinese buyers have seen some benefit from redirected domestic demand. But these winners are the minority the majority of small businesses are facing higher costs with limited ability to absorb or pass them on.

Can small businesses get a refund on tariffs paid?

Yes, partially. Since April 21, businesses that paid tariffs under the now-illegal IEEPA provisions can apply for refunds through the CAPE (Consolidated Administration and Processing of Entries) system. Only tariffs that were estimated but not finalised, or within 80 days of final accounting, are currently eligible. To apply, register with Customs and Border Protection’s electronic payment system and submit a declaration of the goods you paid tariffs on. If approved, refunds take 60-90 days. Consult a customs broker or trade attorney to assess your specific eligibility.

What are small businesses doing to survive Trump’s tariffs?

The most effective strategies being used by small businesses are: diversifying supplier relationships away from China toward Vietnam, Mexico, and India; repricing transparently with customers and explaining why; applying for tariff refunds where eligible under the CAPE system; using AI productivity tools to reduce operational costs and offset margin pressure; and building inventory flexibility to adjust quickly when trade policy changes. The businesses navigating best are those that stopped waiting for policy certainty and built operational resilience instead.

How do Trump tariffs affect global supply chains?

Trump’s tariffs are accelerating a global supply chain shift that was already underway. Vietnam, Mexico, and India are seeing manufacturing investment surge as businesses move production away from China. However, the shift is not straightforward many components are still sourced from China regardless of where final assembly happens, meaning tariff costs persist. The broader realignment is part of a global de-risking trend covered in our analysis of how global manufacturing is shifting in this decade.