Three Ways Small Businesses Can Prepare Now For The Impact Of Tariffs

Forbes

7 hours ago

Donald Trump successfully ran on a platform of raising tariffs on trading partners who, in his words, were 'ripping us off.' Declaring April 2, 2025, as 'Liberation Day,' the president announced a wide-ranging trade policy that entailed a baseline 10% tariff on nearly every import and "reciprocal" tariffs imposed on countries with which the U.S. had substantial trade deficits with the U.S. The proposal marked the most significant U.S. tariff increase in a century.
Trump envisioned putting tariffs on countries that 'treat us unfairly' to boost American manufacturing, create jobs, reduce U.S. trade deficits, address unfair trade practices, raise revenue, and reduce the national debt. His goal, he says, is to create new incentives for consumers to buy American-made products. For instance, earlier this month, he announced that foreign-based tech companies that invest in the U.S. will be exempt from 100% tariffs on computer chips.
Trump also insists that he is counteracting the high levies that America's trading partners have imposed – directly via tariffs and indirectly via VAT and barriers – for decades.
Related: What Trump's Tariffs Will Mean For Small Businesses
The plan was met with skepticism from economists and Trump's political opponents, who warned of the dangers of igniting a global trade war and predicted spiraling inflation. However, inflation has largely stayed in check, in part because many U.S. companies absorbed the cost of the tariffs, which kept prices stable for consumers.
So far in fiscal year 2025, government revenue from tariffs reached $108 billion, a 94.3% increase compared to the same period in Fiscal Year 2024 and accounted for 2.7% of federal revenues. The figures will certainly rise if tariffs remain in place.
Initially, Canada, China, and Mexico announced retaliatory tariffs, and Trump has delayed some implementation and softened his rhetoric since April 2. Meanwhile, a number of countries have struck deals, including:
Notably among the countries that have not signed trade agreements with the United States are Mexico and Canada. Trump extended Mexico's tariff deadline for 90 days after a phone call with Mexican President Claudia Sheinbaum. Canada has battled back and forth with Trump since the beginning of his term, and thus far, no agreement has been reached. China and the U.S. continue to negotiate.
Impact of Tariffs on Small Business
Although tariffs have not had the negative effect on small businesses that was initially predicted, their impact may yet be seen. Some importers have covered the tariffs on their own. Others purchased large amounts of inventory before Trump imposed the levies, which enabled them to avoid the higher costs. However, those supplies will not last forever, and businesses will once again need to purchase inventory.
In August, tariffs began to show up in economic data in a meaningful way. Wholesale inflation surged in July, and as tariffs become more entrenched in the U.S., inflation could rise. The Producer Price Index (PPI), which measures price changes before they reach consumers, rose 0.9% in July from the prior month – the largest jump in over three years, according to the Labor Department figures released on Aug. 14.
Experts predicted only a 0.2% increase and are forecasting higher costs for shoppers when August's Consumer Price Index (CPI) comes out next month. The July figure was 2.7%, which is above the 2% target inflation rate that the Federal Reserve looks when making decisions on lowering interest rates.
Related: Despite Trump's Pressure, Fed Holds Interest Rates Steady
Small businesses often lack the financial buffers and supply chain flexibility of larger firms, making them particularly vulnerable to price shocks. For instance, California wineries are hurting from the 15% tariff slapped on French wine barrels. This will continue to squeeze their profits unless they raise prices.
How Small Businesses Can Plan to Survive Trump's Tariffs
Small businesses should look to diversify suppliers now, if they have not already begun to do so. If possible, try to find for domestic suppliers that produce quality items in sufficient amounts and/or try to buy from countries that are not subject to high tariffs. Additionally, business owners should try to negotiate lower prices from existing suppliers. While this might be a tough ask, the suppliers may be more willing to negotiate if they fear losing a loyal customer.
In both good times and bad, successful business owners should be looking to maximize their earnings by leveraging technology to improve processes, including inventory management, billing, online marketing, and payroll. Streamlining internal processes and eliminating operational inefficiencies will help improve productivity.
Improve your financial management by closely monitoring expenses, eliminating non-essential spending. Additionally, businesses should consider securing a line of credit or a working capital loan to help manage cash flow disruptions, including a large, unexpected increase in cost of supplies due to tariffs. Further, having a cash reserve available can enable you to quickly take advantage of deals and special offers on inventory and other expenses that hinge upon upfront payment.
Overall, business owners should make sure they are informed about trade policy changes and prepared to adapt accordingly and make decisions now that will positively impact your business in the future. By proactively implementing strategies to adapt, small businesses can better position themselves to withstand the challenges posed by tariffs and increase their chances of long-term success.
While economic times are challenging for many small businesses currently, research shows that they are indeed weathering the storms. The National Federation of Independent Business (NFIB) said that its Small Business Optimism Index rose to 100.3 last month, slightly above the 52-year average of 98. Respondents reported better business conditions and believe that now is a good time to expand.
Further, the latest Biz2Credit Small Business Earnings Index, which examined July 2025 figures, reported that average monthly earnings increased to $92,900 in July 2025, rising nearly 50% from June. This continues a positive run for earnings since January, which in July were three times as high as they were at the beginning of the year.
However, the unforeseen future always presents risks, and small business owners are expressing concern, as the latest Census Bureau Survey shows. Small businesses increasingly report paying higher prices for the goods and services they buy due to tariffs, and they are slowly beginning to raise the prices they charge their customers.
Initially, companies try to absorb the cost increases caused by tariffs through lower margins while reducing other expenditures. Over time, however, the price increases are passed on to retailers, and ultimately, to consumers. It remains to be seen whether inflation continues to rise or if people cut back on spending, which could lead to recession. Either way, small businesses should be preparing now for higher tariffs now – even if the president decides to lower or even eliminate some of them.