The ripple effects of recent tariff increases are making their way through San Diego’s small business community, forcing local entrepreneurs to rethink strategies amid rising costs and market uncertainty.
When President Biden doubled tariffs on Chinese steel and aluminum last month, Jacob Ramirez wasn’t particularly concerned. His family-owned hardware store in North Park primarily sources American-made tools and building supplies. But within weeks, his suppliers began sending notices of price increases.
“I’m three steps removed from direct Chinese imports, but somehow I’m still getting hit with 10-15% price hikes across the board,” Ramirez told me during a recent visit to his shop. “My distributors blame their manufacturers, who blame their raw material costs. It’s a chain reaction I wasn’t prepared for.”
This scenario is playing out across San Diego County as the economic impact of tariff policies reverberates through complex supply chains, according to data from the San Diego Regional Chamber of Commerce. Their recent survey found 64% of local small businesses reporting supplier price increases directly attributed to tariff changes in the past quarter.
The Federal Reserve Bank of San Francisco estimates that the average American household will pay an additional $700-900 annually due to the cumulative effect of recent tariff increases. For San Diego’s small business community, which employs nearly 60% of the county’s workforce, the impact threatens already-thin profit margins.
“We’re seeing a troubling pattern where small businesses are forced to either absorb these costs or pass them along to consumers,” said Dr. Maria Chen, economist at San Diego State University. “Neither option is sustainable long-term, especially for businesses still recovering from pandemic-era disruptions.”
For Olivia Nguyen, who runs a boutique electronics repair shop in Hillcrest, the semiconductor components she needs have jumped nearly 30% in price. “I can’t just raise my repair fees by that much overnight. People will just buy new devices instead,” she explained while delicately replacing a microchip in a customer’s tablet.
Nguyen has found a creative workaround – partnering with other repair shops to place bulk orders directly from Taiwan instead of through her usual U.S. distributor. “It’s more paperwork and longer lead times, but I’ve cut the price increase down to about 12%. Still painful, but manageable.”
This kind of adaptation is becoming necessary survival strategy. The San Diego Regional Economic Development Corporation reports that approximately 40% of local small businesses are actively seeking alternative supply chains, with many looking to Mexico, Vietnam, and other non-tariffed sources.
“Small businesses don’t have the resources of larger corporations to quickly pivot their supply chains,” noted Carlos Gomez, policy director at the San Diego Hispanic Chamber of Commerce. “But they often have the advantage of agility and local relationships that can help them weather these challenges.”
Some businesses are finding unexpected silver linings. At Oceanside Brewing Supply, owner Thomas Wright has seen increased interest in his American-made brewing equipment, which was previously considered premium-priced compared to Chinese imports.
“The price gap has narrowed considerably,” Wright said, gesturing to a row of stainless steel fermenters manufactured in Portland. “Suddenly my domestic suppliers are competitive again. It’s been years since I could say that.”
The tariff situation remains fluid, with both President Biden and former President Trump signaling support for continued protectionist trade policies. The uncertainty itself poses challenges for small business planning.
According to research from the Federal Reserve Bank, businesses typically need 12-18 months to fully adjust to significant tariff changes. With election-year politics potentially bringing more trade policy shifts, San Diego’s business community faces extended uncertainty.
“We’re advising clients to build flexibility into their business models,” said Sarah Jensen, small business advisor at the San Diego Small Business Development Center. “Diversifying suppliers, renegotiating contracts with price adjustment clauses, and building modest price increases into their long-term planning.”
For consumers, the effects may not be immediately obvious but will gradually appear as businesses adapt. The San Diego Consumer Price Index already shows a 0.8% increase in durable goods prices over the past quarter, outpacing the national average of 0.6%.
“I’ve had to get creative with pricing,” said Ramirez, showing me a display of hammers with a new “bundle pricing” strategy. “Instead of raising the price of each item, I create packages that deliver better overall value while protecting my margins.”
As San Diego’s economy continues navigating these challenges, the resilience of small businesses will be tested. But if history is any indication, local entrepreneurs will find ways to adapt and survive.
“San Diego businesses have weathered economic storms before,” noted Chen. “The combination of our diverse economy, proximity to alternative markets like Mexico, and strong local business networks provides some insulation from these national economic pressures.”
For now, small business owners like Ramirez, Nguyen and Wright continue adapting day by day, proving once again that economic policy made in Washington ultimately gets implemented on Main Street – with all the creativity, frustration, and perseverance that entails.
