How Tariffs Impact Small Businesses

🎓 From MBA Classrooms to Startup Reality: What Tariffs Just reminded Me About Econ 101 — The Hard Way Building a business, we’re almost always in survival mode. We're in the trenches — raising capital, managing cash flow, shipping product, keeping your team motivated. You're not thinking about macroeconomic policy on a Tuesday morning. You're thinking: Did the product ship on time and bug free? How are customers engaging? Did we hit revenue targets? Is payroll safe? Did that shipment clear customs? But this week... tariffs brought me straight back to the classes of undergrad and MBA economics. 📉 The new tariff directive dropped like a policy nuke: 10% tax on all imports 34% on China, 32% on Taiwan, 20% on the EU A whopping 25% on all foreign cars I didn't need a professor to tell me what this meant. I could see it plain as day: This is a tax — with patriotic packaging. 💡 Let’s break it down, economics-style: Tariffs increase input costs Businesses don’t absorb that cost (small businesses can't) — they pass it downstream to the customer The end result? 🔹 Higher consumer prices 🔹 Smaller margins 🔹 Less room for bonuses, hiring, or reinvestment Basic economic theory 👩🏽💼 Melissa Butler, founder of The Lip Bar Inc. Bar, nailed it in one sentence: “We can’t just eat a 32% tariff. That’s our margin — our ability to pay people, invest in marketing, grow.” Her products are mostly made in Taiwan. Tariffs just turned profitability into uncertainty. She spoke for thousands of founders who are too busy surviving to post on Instagram about economic policy. And that’s the hidden cost no one's talking about. Yes — it affects the price of your next car or phone. But it kills momentum for the exact people America says it wants to empower: 🚀 First-generation founders 🛍️ Minority-owned businesses 💼 Cash-conscious startups 👷🏾♂️ The working-class entrepreneur with a Shopify account and a dream 🎓 In class, we debated this stuff with graphs and theory. In the real world, it shows up as: “Can I still afford my supplier?” “Should I raise prices and risk losing customers?” “Do I delay that hire?” “Will I make payroll in Q2?” That’s not Econ 101. That’s Startup 911. 🧠 As founders, we’re taught to pivot, adapt, optimize. But there’s only so much optimization you can do when you’re absorbing a 32% tax hike overnight — with no heads up, no subsidy, and no lobbyist to fight for you. So: 📉 Tariffs might work on paper — but on pavement, they punish the wrong people. 📈 Economic independence shouldn’t come at the expense of economic equity. 🗣️ And if we really want innovation to thrive, we need to stop making it harder for the builders to build. Building a wall around the economy doesn’t protect us — it holds us back. It raises costs and shuts out the very people we claim to champion. Gillian Marcelle, PhD Samantha Katz Mike Green Shari Dunn L C D D https://lnkd.in/eW8qh4uF

I am thrilled to announce the launch of the Andersen Institute for Finance and Economics blog! In the first post, Khia Kurtenbach looks at the impact of #tariffs on #SMEs, possible implications for the US economy (#SMEs account for about half of US #employment), and how this could be an opportunity for regional #banks.   A staggering 97% of U.S. importers are #SMEs, accounting for one-third of total imports by value. #SMEs also have outsized exposures: 40% of their #imports are from #China. Importantly, #SMEs often lack the working capital or access to #bank #creditlines that larger businesses can tap into –a tool helpful to smooth through some of the #tariffs impacts (for example, via front running #tariffs with larger inventories or smoothing through price increases). But #tradepolicy changes could also create opportunities – notably, regional lenders and small #banks have a unique opportunity to capitalize on these disruptions and deepen their partnerships with #SMEs. As of 2023, more than two-thirds of #SMEs reported choosing a small or regional financial institution as their banking partner. Here is why they are going to rely on those relationships: -- #SME credit needs are likely to increase as tariffs change #inventory management plans in light of #supplychain disruptions. #SMEs don’t have the capital to run larger and longer #inventory cycles, and they can’t tap into the #bondmarket, so #banks are often the only available option. -- Many #SMEs will also see input costs go up and may need to use #creditlines to pay for #tariffs when due at customs. Passing on these higher input costs to downstream consumers will likely occur with a lag. -- Some #SMEs will also have a greater desire or need for #currency hedging in light of recently increased volatility in #FX markets. https://lnkd.in/esVi69xq

THE REAL IMPACT OF TARIFFS… All of these tariff announcements have been made as a way of ostensibly fighting unfair trade practices from other countries, especially China. Let’s explore the immediate impact on a hypothetical small business in the USA… THE SCENARIO: You’re a small toy or apparel importer who has worked for years to build up a healthy little business with a simple annual P&L: $20.0 million retail sales (consumer spend) $10.0 million revenue (for your company) $5.0 million cost of goods (manufacturing) $2.0 million advertising $1.0 million employee salaries & benefits $0.75 million other costs (rent, electricity, internet, insurance, etc) $0.25 million interest on loan $1.0 million pre-tax profit $0.275 million tax (21% federal + 6.5% NY state) $0.725 million for owners, investors, and reinvestment YOUR BUSINESS: You’ve developed and marketed a line of products that you produce via a reliable and high quality manufacturer in China. No one in the USA has made your products for decades; their costs were more than double due to higher costs of labor and rent and other utilities. You had to pay hundreds of thousands for initial molds to be made in China, but that cost can be depreciated over time. YOUR UNIT ECONOMICS: $2.25 - cost of goods (ordered 4-5 months out) $0.25 - cost of shipping (via 6-8 weeks ocean) $2.50 - total cost to your company $5.00 - price you sell to retailers $4.99 - retailer cut (so they can pay their bills) $9.99 - price consumers pay at shelf YOUR ORDERING PROCESS: You order $5 million in product + shipping per year in 4 even shipments of $1.25 million. Every quarter, this is a massive cash outlay that represents more than your annual profit. It’s always a risk. It’s always painful. But you know it all comes together to deliver that business and the profit you’ve worked for years to build up. CHINA TARIFFS: - Feb-1st: 10% tariff… you made your quarterly order in October… it’s already on the ocean, so you have to just take it. You start exploring how to fund $125,000 to pay it… - Mar-4th: 20% tariff… suddenly you need to find $250,000… this is now a major risk to your business - both the immediate cost, and the ongoing impact. - Apr-2nd: 54% tariff… this is now a major risk to your business - just the first tariff payment alone is now $675,000…. You call your bank to explore loan options, and it seems you might have to put up your house as collateral… - Apr-7th: 104% tariff… you start doing the math, but before you’ve had the chance to do so: - Apr-8th: 125% tariff… your shipping agent calls you to tell you that your Oct order has arrived… and it has a fresh tariff bill of $1.56 million attached. Where on earth are you going to find $1.56 million dollars with no notice? Even if you “pass it on” to your USA retail partners (and they in turn pass it on to consumers), you won’t get paid for 30-60 days… and the 25%+ price increase you’ll need to pass on will tank demand… (TO BE CONTINUED…)

💥 Tariffs Are Crippling Small Asian American Importers WENDY SHEN, founder of FLOMO/Nygala Corp. and a Taiwanese immigrant, has weathered nearly every major economic shock in the past three decades—9/11, the Great Recession, and a pandemic. But the latest threat to her New Jersey-based business isn’t a market crash—it’s tariffs. My latest Forbes article spotlights how steep tariffs on Chinese imports—now as high as 145%—are pushing resilient, women-owned businesses like Flomo to the brink. Despite diversifying suppliers and customers, and leveraging every tool from duty-free zones to tariff code reviews, Shen is being forced to pause shipments and rethink her entire business model. 📉 These policies don’t just target foreign governments—they hit the small U.S. firms that drive job creation, especially those led by Asian American women. 📊 With 1.4 million Asian American women-owned businesses contributing to U.S. GDP and employing 1.6 million people according to The Wells Fargo 2025 Impact of Women-Owned Businesses, the stakes are high. ⚠️ It’s time for trade policy to reflect the reality of who today’s entrepreneurs are—and protect them accordingly. 👉 Read the full story on Forbes: https://lnkd.in/efNnMGbS Thank you Leandra Joseph, WBEC Metro NY and WBEC Greater DMV, WBENC, Angela Dingle, Women Impacting Public Policy (WIPP), Richard Trent, Shawn Phetteplace, Main Street Alliance #Tariffs #SmallBusiness #AAPIHeritageMonth #WomenInBusiness #TradePolicy #Forbes