Tariff policies are hitting small business owners where it hurts most – their ability to hire new workers. A recent survey from the Small Business Association shows that 67% of small enterprises have delayed or canceled hiring plans due to increased costs from the latest round of import taxes. This troubling trend threatens to undermine what has been a resilient sector of job creation.
The numbers paint a stark picture. Small businesses, which typically create about two-thirds of new jobs in America, added only 32,000 positions last quarter. That’s down from 98,000 during the same period last year. “We’re caught between impossible choices,” explains Maria Sanchez, who owns a small manufacturing company in Ohio. “Either absorb costs we can’t afford or pass them to customers who’ll go elsewhere.”
The ripple effects spread far beyond individual businesses. Communities that depend on small business employment are seeing increased financial strain. In Millville, New Jersey, a town of 27,000 people, the unemployment rate has climbed 1.2 percentage points since January. The local economic development office reports that small firms have postponed plans to hire roughly 200 workers total.
Supply chains face mounting pressure too. Tariffs ranging from 10% to 25% on imported components have forced small businesses to rethink their operations. A survey from the National Federation of Independent Business found that 42% of small manufacturers have reduced their product lines. Another 31% report switching to domestic suppliers at significantly higher costs.
“What people miss in the tariff debate is how thin the margins are for most small operations,” notes economist Thomas Frederickson from the Economic Policy Institute. “When your profit margin is 8%, a 15% increase in component costs can’t simply be absorbed.” Federal Reserve data backs this up, showing that small business profit margins have contracted to their lowest level since 2009.
The timing couldn’t be worse. Small businesses were finally recovering from pandemic-related challenges when tariff increases took effect. According to Federal Reserve research, 76% of small businesses reported being financially healthy at the start of last year – the highest percentage since 2019. That number has now dropped to 58%.
Some industries feel the pain more acutely than others. Retail businesses that rely on imported goods have been hit particularly hard. “We’ve had to shelve plans to open a second location,” says James Henderson, owner of a home goods store in Atlanta. “The math just doesn’t work anymore with our margins squeezed so tight.” The retail sector has seen a 24% decline in small business expansion plans compared to last year.
Manufacturing startups face even steeper challenges. The American Manufacturing Association reports that new business formations in the sector have decreased by 17% year-over-year. “The tariffs create a significant barrier to entry,” explains manufacturing consultant Rebecca Wong. “New businesses can’t achieve the scale needed to absorb these costs.”
Not all experts agree on solutions. Some economists argue that short-term pain will lead to stronger domestic production. “There’s an adjustment period, but we’re already seeing increased interest in reshoring,” claims trade policy specialist Andrew Moretti. Others point to concerning data showing limited domestic capacity to fill supply gaps.
Small business owners themselves remain divided. A Chamber of Commerce poll found that 38% support tariff policies in principle, while 52% oppose them. The remaining 10% express uncertainty. Nearly all respondents, however, agree that implementation has been too abrupt. “We need time to adapt,” says Frank Delgado, who runs a furniture business in North Carolina. “These changes can’t happen overnight.”
Government assistance programs have provided limited relief. The Small Business Administration expanded its Economic Injury Loan program, but only 23% of affected businesses have successfully navigated the application process. Many owners report that the program’s requirements don’t address their specific tariff-related challenges.
Some businesses have found creative solutions. Colorado-based electronics manufacturer Alpine Tech
