Executive Summary: What Small Businesses Need to Know About the New Tariffs
The April 2025 U.S. tariff announcements represent a fundamental shift in trade policy with immediate consequences for small and medium-sized businesses (SMBs). Taking effect immediately after President Trump’s “Liberation Day” Rose Garden announcement, these comprehensive tariffs demand urgent strategic responses from business owners across all industries.
The U.S. federal government’s introduction of new tariffs – including broad-based levies such as a 10% duty on all imports – has significant implications for small and mid-sized businesses across industries (smallbusinessmajority.org). These tariffs raise the cost of imported goods and materials, squeezing SMBs that typically operate on thin margins.
As the leading managed technology services provider to SMBs, Airiam has a unique view of the potential impact and concerns that SMBs will face with the tariff changes. We’ve put together this guide providing essential information and actionable strategies to help SMBs like you navigate, mitigate, and potentially benefit from the new tariff landscape.
Reach out to us to see how Airiam can help you overcome the challenges ahead and continue to thrive.
The 2025 Tariff Structure: What Small Businesses Are Paying Now
The new multi-tiered tariff system includes:
- Base Rate: 10% universal tariff on imports from all countries (effective April 5, 2025)
- Targeted Higher Rates: Country-specific rates for “worst offenders” (effective April 9, 2025)
- China: 54% total tariff
- European Union: 20% tariff
- Vietnam: 46% tariff
- Cambodia: 49% tariff
- North American Trade:
- USMCA-compliant goods: 0% tariffs
- Non-USMCA goods: 25% tariffs (Canadian energy at 10%)
- Special Categories:
- Small packages from China/Hong Kong: 54% tariff (effective May 2)
- Automobiles and parts: 25% tariff (effective April 3)
- Steel and aluminum: 25% tariff (effective since March 12)
Economic Impact on Small Businesses: The Numbers
Small businesses face significant economic consequences:
- Revenue Impact: These tariffs represent the largest tax hike since 1982, increasing federal revenues by $209.4 billion (0.95% of GDP) in 2025
- Growth Reduction: The April 2 tariffs alone will reduce U.S. GDP by 0.5%, with all tariffs projected to shrink GDP by 0.8%
- Employment Effects: Tariffs on Canada/Mexico are estimated to reduce work hours equivalent to 223,000 full-time jobs
- Income Reduction: After-tax incomes projected to decrease by 0.6% on average
- Average Rate Increase: The average tariff rate on all imports will jump from 2.5% to 18.8%—the highest since 1933
Immediate Challenges for Small Businesses
Supply Chain Disruptions
Small businesses face critical supply chain challenges:
- Cost Inflation: U.S. manufacturers and importers are already experiencing surging input costs, with steel prices jumping 12-15% in February
- Sourcing Limitations: Many small business owners report that “you cannot source everything in the United States,” creating existential challenges
- Documentation Complexity: Complex certification requirements under 19 CFR 182 for USMCA preference create administrative burdens particularly difficult for resource-constrained SMBs
- Logistics Volatility: Short-term freight rate spikes as companies rush to stockpile, followed by potential volume declines
Financial Pressures
Small businesses face immediate financial strain:
- Margin Compression: The Consumer Brands Association warns companies are “incredibly tapped out” with “nowhere to absorb” cost increases
- Cash Flow Challenges: Accelerated inventory purchasing creates working capital pressure
- Pricing Power Limitations: Small manufacturers may “lose market share to competitors that have elected not to pass costs through pricing”
- Credit Access Challenges: Tariffs may increase “credit risk for borrowers in affected industries” while potentially forcing Fed tightening
Some Industry-Specific Tariff Impacts for Small Businesses
Manufacturing SMBs
Small manufacturers face complex challenges:
- Direct Cost Increases: Manufacturing experiences “the widest variety of effects,” with higher raw material costs and supply chain disruptions
- Competitive Pressure: Some manufacturers “may lose market share to competitors with lower-cost alternatives”
- Innovation Constraints: Historical research shows tariffs can reduce innovation: “Less competitive industries are less innovative, and less innovative industries are less productive”
- Strategic Reconfiguration: Tariffs are “prompting companies to rethink sourcing, pricing, and production strategies”
Retail and E-commerce Small Businesses
Retailers face immediate consumer-facing challenges:
- Price Sensitivity: Tariffs affect “a variety of consumer products including cellphones, children’s toys and clothing that Americans buy every day”
- Business Model Threats: Small specialty retailers report having to “reconsider entire retail strategies because the packing cost is unsustainable”
- Inventory Constraints: Companies are rushing to stockpile goods, but “it’s easier to stock up on some goods than others”
- E-commerce Disruption: The 54% tariff on small packages from China impacts small businesses that source from platforms like Alibaba and Temu
Construction and Property Development SMBs
Small businesses in construction face significant materials challenges:
- Materials Inflation: Builders face higher costs for steel, aluminum, and Canadian softwood
- Project Viability: Tariffs on “steel rebar, nails, wiring, and HVAC equipment impact commercial construction costs”
- Contract Challenges: Fixed-price contracts without tariff provisions create immediate profit erosion
- Demand Uncertainty: With GDP reduction of 0.2% from just Canada/Mexico tariffs, commercial property demand may weaken
Financial Services for Small Businesses
Small banks and lenders face new risk landscapes:
- SMB Credit Risk: Tariffs may “slow economic growth, hurt corporate earnings, and increase credit risk”
- Interest Rate Uncertainty: Inflation from tariffs could shift Federal Reserve policy, creating both opportunities and challenges
- Default Rate Increases: If inflation forces rapid Fed tightening, banks could see “curbed loan demand and increased defaults”
- Advisory Opportunity: Small financial institutions can develop tariff impact analysis services
Professional Services for Small Businesses
Accountants, consultants, and lawyers see increased demand:
- Tariff Compliance Services: Companies seeking “guidance on tariff compliance, supply chain re-engineering, transfer pricing adjustments, and lobbying for exclusions”
- Strategic Planning Support: Opportunity to help SMBs develop tariff mitigation strategies
- Financial Modeling: Businesses need help to “model currency exchange, direct and indirect taxes, and other drivers”
- Contract Review: Demand for review of “contracts with suppliers and customers to clarify tariff liability”
Small Business Action Plan: 17 Essential Tariff Response Strategies
Immediate Crisis Response (First 30 Days)
- Tariff Exposure Assessment: Assess tariff exposure across your supply chain and model financial impacts with different pass-through scenarios
- Inventory Strategy: Consider accelerated purchasing of critical imports before tariff implementation dates
- Contract Review: Review supplier and customer contracts to clarify who bears tariff liability and explore renegotiation
- Cash Conservation: Implement expense reduction, collection acceleration, and consider short-term financing
- Customer Communication: Develop clear messaging about necessary price adjustments as major retailers have done
- Cybersecurity Vigilance: Ensure your online and technology assets are being monitored and secured – periods of significant market changes and volatility are ideal times for cyber threats
Short-Term Adaptation (30-90 Days)
- Business Efficiency: Implement solutions that drive increased productivity and efficiency across the business
- Supply Diversification: Evaluate domestic or alternative sourcing options to mitigate duties
- Tariff Classification Review: Ensure optimal classification of products to minimize tariff impacts
- USMCA Compliance: Review qualification for USMCA preference to maintain 0% tariff eligibility
- Non-Tariff Cost Reduction: Identify efficiencies in logistics, operations, or product specifications to offset tariff costs
- Exclusion Applications: Explore “proactive lobbying for exclusions” where viable domestic alternatives don’t exist
Long-Term Strategic Repositioning
- Reshoring Analysis: Conduct detailed make-vs-buy analysis for domestic production, including automation opportunities
- Product Redesign: Consider redesigning products to use domestically available or non-tariffed components
- Business Model Innovation: Evaluate whether service-based revenue streams can complement product sales
- Market Diversification: Explore new geographic markets to reduce dependence on tariff-impacted regions
- Technology Investment: Enhance supply chain visibility systems for better tariff management
Supply Chain Impacts & Strategies
Small businesses face critical supply chain disruptions as tariffs fundamentally alter global trade:
Sourcing Challenges
Many small business owners report that “you cannot source everything in the United States”, creating existential challenges for products that rely on foreign components or materials. U.S. manufacturers have already seen input prices surge, with steel prices jumping 12-15% in February before metal tariffs even took effect.
Mitigation Strategy: Evaluate domestic or alternative sourcing options and consider country-of-origin planning to minimize duties. Additionally, explore redesigning products to use domestically available components.
Documentation Complexity
For goods qualifying for USMCA preference, companies must navigate complex certification requirements outlined in 19 CFR 182, creating substantial administrative burden. CBP has issued multiple Cargo Systems Messaging Service notices on tariff implementations that companies must track.
Mitigation Strategy: Review tariff classification to ensure optimal duty treatment and invest in customs expertise. Enhanced supply chain visibility systems can help track component origins and tariff liabilities.
Logistics Volatility
In the short term, freight rates could spike as retailers rush to buy safety stock ahead of tariff implementations. Conversely, in the longer term, broad tariffs could discourage imports, potentially slowing freight volumes at ports and driving down rates.
Mitigation Strategy: Consider accelerated purchasing of critical imports before tariff implementation dates, but balance this against working capital constraints. Review logistics contracts to maintain flexibility.
Cash Flow Pressure
Accelerated inventory purchasing creates working capital pressure at a time when many SMBs may already be cash-constrained. The Consumer Brands Association warns companies are “incredibly tapped out” with “nowhere to absorb” cost increases.
Mitigation Strategy: Implement cash conservation measures while exploring supply chain financing options. Identify and implement efficiencies through AI and automation technologies in non-tariff-impacted areas like operations or product specifications to offset costs.
Small Business Success in the New Tariff Environment
Despite the challenges, small businesses that act decisively can navigate—and even thrive—in the new tariff environment. By implementing the strategies outlined in this guide, SMBs can minimize disruption, preserve margins, and potentially gain competitive advantages over less adaptable companies.
The administration has indicated tariffs could be decreased “if trading partners take significant steps to remedy non-reciprocal trade arrangements”, but SMBs should prepare for these elevated tariffs as the new normal.
This remains “an evolving situation that could change daily,” requiring continued vigilance from small business owners. By staying informed and implementing comprehensive tariff mitigation strategies now, your small business can position itself for success in this fundamentally altered trade landscape.
How Airiam Can Help
Airiam can work with you to ensure that your business is able to adapt to the challenges brought by the changing tariff landscape.
Our cybersecurity and resilience services will secure your business while ensuring that your data is protected with immutable backups. And Airiam’s AI services will help you increase productivity and efficiency across your organization to thrive despite the increased pressures from market changes driven by the recent tariff changes.
Reach out now to prepare for the changes ahead. Thrive and stay ahead of the competition.
Key Resources for Small Businesses Navigating Tariffs
- U.S. Customs and Border Protection: CBP Cargo Systems Messaging Service
- Small Business Administration: Tariff Assistance Programs
- International Trade Administration: Export.gov
- U.S. Commercial Service: Trade.gov
- Trade Associations: Industry-specific guidance and advocacy
