Key Takeaways

• President Trump made tariffs a key campaign promise, and has proposed significant tariffs against Canada, Mexico, and China, and other countries. 
• Many economists predict tariffs will lead to increased prices, and will likely impact consumers and small businesses more than large businesses.
• Small business owners should understand how tariffs may impact their business and consider taking steps to mitigate the possible effects. 

Tariff Updates

Last updated 1/21/2025

The US International Trade Commission publishes the Harmonized Tariff Schedule which you can find here. It also includes a change record that can be used to identify changes in tariffs. Warning: it’s a long list.  

On January 19, 2025, President Trump said that 25% tariffs on products from Canada and Mexico may come as soon as February 1, 2025. He did not impose the “Day 1” tariff on imports from China that he campaigned on, and has ordered a trade study instead. 

What to Know About Tariffs

Steve Chou knows a thing or two about how tariffs can affect small businesses in the US. His ecommerce store has been importing products from China for years, and he works with other ecommerce sellers in a variety of industries through his ecommerce education business, MyWifeQuitHerJob.com. 

He has recently shared his thoughts on YouTube about what to expect from the new round of tariffs promised by President Trump on the campaign trail. 

While President Trump has stated he will impose large, across the board tariffs on goods from China, in his last term, tariffs were rolled out in stages, and at different levels depending on the type of goods. “Most of my products (at Bumblebee Linens) were hit with a 7.5% tariff,” Chou says. He points out there were “a lot of exemptions and lower rates for everyday products.” 

Some small businesses, like his, benefitted from lower tax rates, which offset the higher costs. “Don’t panic just yet,” says Chou. “If history is any guide, the effects of tariffs will be noticeable but not catastrophic.”

Not all business owners are as confident as Chou. Many are worried their costs will go up if tariffs are imposed, and that they will either need to pass those costs on to buyers (which may be tricky if customers are very price sensitive, as they are on Amazon, for example), or if margins allow, absorb the increased costs and make less money. 

And not all business owners have fully considered the potential affect of tariffs. The Endeavor Business Intelligence Pulse Survey, Dec 2024, surveyed B2B vertical marketers and found that only 16% of organizations report being fully prepared for potential tariff increases. The majority (54%) are still in early stages of readiness, and 23% admit to having no preparations in place.

Here, our goal is to keep small business owners up to speed on tariffs, and offer resources to help them respond and adapt. As new tariff policies take effect, we’ll update this article. 

What is a Tariff?

“A tariff is a tax levied on an imported good,” explains economist Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics at the Rochester Institute of Technology who has written a helpful primer on how tariffs work. (See the resource section below.)

The foreign seller pays the tariff, while the government collects it. Companies in the US that purchase foreign products for use in their business either absorb the cost, pass it along to customers, or some combination of the two.

There are two main types of tariffs. An ad valorem tariff is based on the value of the imported item. The 60% tariff on all goods imported from China that Trump proposed while campaigning is an example of this type of tariff. 

The other type of tariff is “a ‘unit’ or specific tariff,” which is “a tax levied as a fixed charge for each unit of a good that is imported – for instance $300 per ton of imported steel,” Batabyal explains.

Tariffs can be used to raise revenue for a government, or to try to protect businesses from foreign competition.

While the goal of some tariffs may be to increase manufacturing or sales of U.S. made products, the reality is more complex than that. Many U.S. businesses rely on imported goods that will be very difficult or expensive to make in the US, or that rely on parts or ingredients that must be imported. 

This chart shows how US import tariffs have changed since 2009: 

Source: Kansas City Federal Reserve Economic Bulletin, January 17, 2025

How Tariffs Can Impact Small Businesses

There are a number of ways tariffs may impact small business owners. Here are some of the main ones:

1. Increased costs/lower profits 

Small businesses can face higher expenses for imported materials and goods, which can eat into their already thin profit margins. Keep in mind that small businesses often have less purchasing power than large ones, and less ability to influence the government officials who initiate tariffs. 

2. Price increases

To offset tariff-related costs, businesses may be forced to raise prices, which could be good or bad for individual businesses. On the positive side, tariffs may make goods from overseas more expensive, which could make prices more competitive for some US producers or sellers. 

On the other hand, consumers buy a lot of goods that are sourced from other countries where costs are lower, and small businesses may find their customers are either unwilling or unable to pay higher prices.

3. Supply chain disruptions 

This can be a significant problem for small businesses. Remember all the supply chain disruptions that occurred during the pandemic? Tariffs can cause chaos in global supply chains, forcing U.S. importers to struggle with avoiding tariff impacts.

4. Rising costs

Inflation refers to an increase in cost of goods and services. Tariffs can contribute to inflation. As the cost to consumers and businesses go up, they may have less money to spend. Walmart’s finance chief John David Rainey has warned that, “Tariffs are going to be inflationary, there’s no disputing that.”

The Peterson Institute for International Economics says that “Trump’s bigger tariff proposals would cost the typical American household over $2,600 a year.”

5. Trade wars

Tariffs by one country may result in retaliatory tariffs which may make it harder, or more expensive, for US businesses to export their products, and which can lead to trade wars. 

The Tax Foundation estimates that “retaliatory tariffs stemming from Section 232 and Section 301 actions total approximately $13.2 billion in tariff revenues.” It also points out that while US-imposed tariffs raise revenue for the US, “tariffs imposed by foreign jurisdictions raise no revenue for the US but result in lower US output.”

6. Slower growth

Uncertainty is part of running a small business, but higher costs and rapid changes in policy may leave businesses less willing to spend or invest. 

Industries Most Likely to Be Affected by Trump’s Proposed Tariffs

1. Housing and Construction: This industry relies heavily on timber, aluminum and steel from Canada, which could become much more expensive if tariffs are imposed on these goods. 

2. Automotive Industry: U.S. automakers like Tesla have been significantly affected by tariffs, facing increased costs and having to adjust pricing strategies. 

3. Steel and Aluminum Industries: These sectors have been at the center of U.S. tariff policies, with recent increases in tariff rates from 0-7.5% to 25% in 2024.

4. Technology Sector: Chip makers and electronics manufacturers dependent on China for sales are particularly vulnerable. 

5. Agriculture: Farmers have experienced significant challenges, with some reporting tariff-induced loss of markets reducing incomes and jobs in farm communities.

6. Small Manufacturers: Various small businesses across industries have struggled, including precision-part manufacturers, industrial metal fabricators, and furniture makers.

7. Trucking Industry: Experts warn that tariffs could intensify the slump in the U.S. trucking industry.

8. Smaller ecommerce businesses: Smaller ecommerce businesses that rely heavily on goods from China may find it harder to shift to new suppliers, especially if supply chains become strained and  larger businesses are competing for those same products.

These industries are particularly susceptible to tariff-related issues due to their reliance on global supply chains, imported materials, or export markets affected by retaliatory tariffs.

What Your Small Business Can Do Now

Here are steps to consider as US-businesses navigate the possibility of new tariffs and changes in trade policy. 

1. Know your numbers 

High margin products have more wiggle room when it comes to pricing. That flexibility may allow you to raise prices less aggressively and still make a decent profit margin, even if it’s less than before the tariffs were imposed.

“The higher your margin, the less effect tariffs will have on your business,” Chou points out. 

2. Order now

If your business relies on imported goods likely to be affected by tariffs, Chou recommends placing your orders now before new tariffs take effect. (He also warns, however, that the cost of freight will likely be higher as other buyers do the same.) 

A small business loan, a line of credit, or even a 0% intro APR business credit card, may allow your business to stock up now without spending a lot of cash. There is the risk that you could find it harder to sell your products or services, though, if inflation increases quickly. Proceed with caution.

3. Research your supply chain

If you can, look into alternative sources for the goods or services you buy. That’s often easier said than done, especially for certain types of businesses that rely on the often cheap but sophisticated manufacturing processes that China has become known for. Consider investigating other options before a possible profit-killing tariff hits. 

4. Speak up

If you’re concerned about tariffs, contact your elected officials in Washington to let them know how proposed tariffs may impact your business. 

The US Constitution grants Congress the power to collect taxes and duties. But under subsequent Trade Acts, the President may be able to enact tariffs quickly. There have been recent efforts by Congress to “(restore) its authority over these matters,” according to the Yuetter Institute at the University of Nebraska–Lincoln.

Resources: Learn More About Tariffs

For those interested in learning more about how tariffs may impact their businesses, here are several resources worth exploring:

Watch Steve Chou’s YouTube videos about his experience with tariffs here and here. 

Read Amitrajeet A. Batabyal’s primer on how tariffs work. 

The Tax Foundation, a non-partisan, non-profit research organization has published an extensive report on the impact of tariffs. They warned in June 2024 that Trump-Biden tariffs, “the $79 billion in higher tariffs amounts to an average annual tax increase on US households of $625.”

The World Economic Forum has published an extensive guide to predictions about the global economy in 2025, including detailed analysis by individual economists. A key finding: “The majority of chief economists surveyed by the World Economic Forum expect the global economy to weaken in 2025.” One major concern is trade policy.

The Brooking Institute has published a guide, What are tariffs, and why are they rising?, along with related articles on President Trump’s proposed tariffs.