The Impact of Tariffs on Small Businesses During the Holiday Season

Small business owners across the United States are grappling with significant affordability challenges attributed to increased tariffs, health insurance costs, and energy prices. Shirley Modlin, owner of 3D Design and Manufacturing in Powhatan, Virginia, highlighted the uncertainty surrounding U.S. tariff rates, which currently average 16.8%, the highest since the 1930s. Modlin expressed concern about her ability to provide raises and health insurance for her employees due to rising operational expenses. The Center for American Progress (CAP) reported that small business importers faced an average additional cost of $25,000 per month due to tariffs from April to September 2025 compared to the same period in 2024.

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The holiday season is critical for small businesses, accounting for at least one-quarter of annual revenue for 73% of small- and medium-sized retailers. However, many small business owners are feeling the pinch. A survey by Small Business Majority found that half of small business owners increased prices due to tariffs, while 60% reported that tariffs forced them to choose between raising prices or absorbing costs. The economic anxiety surrounding these issues has led to a reported 120,000 layoffs among businesses with fewer than 50 employees in November, marking the largest number of small business layoffs in five years.

Center for American Progress

In addition to tariffs, the impending expiration of enhanced tax credits under the Affordable Care Act (ACA) is raising alarms. Modlin noted that if these subsidies expire, over 20 million Americans could see their health insurance premiums sharply increase. CAP estimates that 4.4 million small business owners and self-employed individuals could face an average rise of $1,500 in health insurance costs.

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Critics argue that the Trump administration's tariff policies have exacerbated the financial strain on small businesses. Senator Ed Markey stated that small businesses are paying more for essential services, attributing this to the tariffs. Conversely, a spokesperson for Republican members of the Senate Committee on Small Business and Entrepreneurship blamed the challenges on Democratic policies, claiming that four years of Democratic control led to a historic affordability crisis.

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The complexity of the current tariff regime has also increased operational burdens for small businesses. For instance, the elimination of the de minimis exception for shipments under $800 has resulted in additional paperwork and compliance costs. Small businesses are now spending more time and resources on tariff-related tasks, which can lead to increased operational costs and reduced competitiveness.

Center for American Progress

• “It's the end of the year and my employees are expecting some kind of raise, but I don't know how much I can give them because I don't know what kind of impact the tariffs are going to continue to have on me,” — Shirley Modlin, Owner, 3D Design and Manufacturing

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• “You can't calculate how demand will suffer from a price rise, so we try to avoid that whenever possible,” — Julie Robbins, CEO, Earthquaker Devices

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• “Now I know it affects big business, but small business runs the world.” — Sondra Stephens, Owner, Jewelry Store

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As the Supreme Court prepares to rule on the legality of the tariffs, small business owners remain uncertain about the future. The ongoing economic challenges, coupled with the potential expiration of health care subsidies, could lead to further layoffs and business closures if not addressed.

Center for American Progress