The looming trade war between the United States and China casts a long shadow over America’s small business landscape. As the political rhetoric heats up with promises of increased tariffs potentially reaching 60% on Chinese imports, the reality on Main Street tells a more complex story than what resonates in campaign speeches.
Small business owners across the country are watching anxiously as election-year promises could translate into economic policy that directly impacts their bottom lines. Many remember all too well the consequences of the previous round of tariffs imposed between 2018 and 2020.
“When the last tariffs hit, we had to completely rethink our supply chain,” explains Jennifer Blackman, owner of Specialty Home Products in Ohio. “We absorbed costs as long as possible, but eventually had to raise prices by about 15%. We lost customers who couldn’t understand why the same products suddenly cost more.”
This experience wasn’t isolated. Data from the Federal Reserve Bank of Atlanta shows that during the previous tariff implementation, approximately 42% of small businesses reported negative impacts on their operations, with nearly a third forced to raise prices and 21% delaying or canceling investments.
The math isn’t complicated, but the consequences are severe. When tariffs increase the cost of imported materials, components, or finished goods, businesses face difficult choices: absorb the higher costs and reduce profit margins, pass costs to consumers and risk losing business, or attempt to find alternative suppliers—a process that can take years and millions in retooling.
According to analysis from the Tax Foundation, the 2018-2019 tariffs reduced U.S. GDP by an estimated $80 billion and eliminated approximately 180,000 jobs. Small businesses, with their limited cash reserves and borrowing capacity, bore a disproportionate share of this burden.
The Peterson Institute for International Economics calculated that the average American household paid roughly $1,300 annually in additional costs due to the previous tariff measures. This increased cost of living further reduced consumer spending power, creating additional pressure on small retailers and service providers.
Chinese manufacturers have traditionally supplied small American businesses with competitively priced components that domestic producers either don’t make or produce at significantly higher costs. The National Federation of Independent Business reports that 72% of small businesses using imported materials couldn’t find suitable American-made alternatives during the last tariff period.
“We want to source American products,” says Michael Thompson, who runs a lighting fixture business in Pennsylvania. “But the reality is, certain electrical components we need simply aren’t manufactured domestically at scale. When tariffs hit those components, we can’t just switch suppliers overnight.”
The story repeats across industries. Small furniture retailers, appliance shops, electronics stores, and clothing boutiques all depend on global supply chains that have developed over decades. Dismantling these relationships creates ripple effects throughout local economies.
The Federal Reserve Bank of New York estimated that U.S. companies paid approximately $46 billion in tariffs during 2019 alone. Contrary to popular rhetoric, these payments came directly from American importers, not from Chinese exporters. Small businesses operating on slim margins felt this tax most acutely.
Goldman Sachs research indicates that small businesses typically operate with about 27 days of cash on hand. When facing sudden cost increases of 25-60% on imported goods, many simply lack the financial cushion to adapt without taking on additional debt or reducing staff.
“We had to let two people go when the tariffs hit,” remembers Sandra Wilson, who owns a small hardware store in Michigan. “It wasn’t that business was bad—our customers were still coming in—but our margins disappeared overnight on about 40% of our inventory.”
Trade economists point to another problem with broad tariff policies: retaliation. When the U.S. imposed tariffs previously, China responded with counter-tariffs targeting American agricultural exports. Farmers in the Midwest saw orders canceled and prices plummet for soybeans, corn, and other commodities.
The U.S. Chamber of Commerce estimates that more than 900,000 American jobs are supported by exports to China. Many of these positions exist in small and medium-sized enterprises that lack the resources to quickly pivot to alternative markets when existing relationships are disrupted by trade disputes.
While proponents argue tariffs will bring manufacturing back to American shores, the timeline for such transitions rarely aligns with the immediate needs of small business owners. Building new factories, training workers, and establishing domestic supply chains typically requires years of investment and planning.
The Economic Policy Institute notes that reshoring manufacturing requires not just tariffs, but comprehensive industrial policy including infrastructure investment, workforce development, and tax incentives—policies that extend far beyond simple import taxes.
Small businesses caught in this transition face significant challenges. A survey by Bank of America found that 67% of small business owners cite economic uncertainty as their primary concern, with rising costs of goods ranking as the second most pressing issue.
“Politicians talk about tariffs like they’re targeting foreign countries, but the immediate impact falls on American businesses like mine,” explains Robert Chen, who imports specialty fabrics for his family’s small textile business in North Carolina. “We’re the ones writing the checks to U.S. Customs, not Chinese companies.”
As election season progresses, small business advocates urge policymakers to consider more targeted approaches that address unfair trade practices without creating collateral damage for domestic enterprises. The Small Business & Entrepreneurship Council suggests policies focusing on intellectual property protection, market access reciprocity, and subsidies for specific industries rather than broad-based tariffs.
For America’s small businesses, the stakes couldn’t be higher. They represent approximately 44% of U.S. economic activity and create two-thirds of net new jobs. Their ability to navigate global trade disruptions will determine not just their own survival, but the economic health of countless communities across the nation.
