The Impact of Tariffs and Economic Pressures on Small Businesses

Small businesses in the United States are grappling with a confluence of challenges, primarily driven by surging import costs, escalating payroll and healthcare expenses, and a scarcity of affordable loans. Doug Scheffel, owner of ETM Manufacturing in Massachusetts, reported significant layoffs due to the adverse effects of the Trump administration's tariff policies, which have created an uncertain economic environment. "Everyone is hunkering down and building up cash. It’s never been this bad," Scheffel stated, highlighting the pervasive anxiety among small business owners.

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The National Federation of Independent Business (NFIB) indicates that the average cost of single coverage health insurance for small companies has increased by 120% over the past two decades. Bryan Pate, CEO of PT Motion Works, emphasized that these rising healthcare costs place small businesses at a disadvantage compared to larger corporations. He noted, “It’s an unfair barrier to hiring,” reflecting the broader sentiment among small business owners who feel overwhelmed by the financial pressures.

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The tariffs imposed by President Donald Trump, averaging 16.8%—the highest since 1935—have further exacerbated these challenges. Pate's company has been significantly affected, leading to the termination of contracts with local assembly workers in favor of cheaper labor in Mexico. He expressed concern that continued tariffs would make it economically unfeasible to sustain his business.

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Troy Rackley, CEO of The Next Level of Performance, criticized the notion that exporting countries bear the burden of U.S. tariffs, stating, “I’m the one that’s paying for it.” This sentiment underscores the frustration among small business owners who feel the direct impact of these policies on their operations and pricing strategies.

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While some businesses are not directly affected by tariffs, they face high borrowing costs. Khari Parker, co-founder of Connie’s Chicken and Waffles, reported interest rates between 20% to 30%, making it difficult to secure affordable capital. Despite efforts by the Small Business Administration (SBA) to support small businesses through loan approvals, the rising costs of borrowing remain a significant hurdle.

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Additionally, the immigration crackdown has led to a shrinking labor pool, complicating recruitment efforts. Antonio McMillion, president of MFP Management & Construction, noted that labor costs have surged by up to 40% due to the need to hire more expensive workers. He remarked, “Hopefully we can pass on the price to the client, but that could also mean you don’t get the job.”

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The SBA has reported approving over 58,000 small business loans worth more than $32 billion since Trump took office, with a record-setting $44.8 billion guaranteed for fiscal 2025. However, small business optimism, which initially surged after Trump’s election, has fluctuated in response to tariff-related uncertainties.

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• “Everyone is hunkering down and building up cash. It’s never been this bad,” — Doug Scheffel, Owner, ETM Manufacturing

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• “It’s an unfair barrier to hiring.” — Bryan Pate, CEO, PT Motion Works

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• “I’m the one that’s paying for it,” Rackley said.” — Troy Rackley, CEO, The Next Level of Performance

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• “It’s very hard to find workers. We can’t always offer the same competitive benefits or pay that larger businesses can,” — Khari Parker, Co-founder, Connie’s Chicken and Waffles

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The current economic landscape poses significant challenges for small businesses in the U.S., driven by high tariffs, rising healthcare costs, and difficulties in accessing capital. As these businesses navigate this complex environment, their resilience and adaptability will be crucial in determining their future viability.

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