The tariff Tightrope: Small Businesses on the Brink

Across the united States, small businesses are grappling with an escalating crisis: the impact of rising tariffs. These levies, intended to bolster domestic production, are rather threatening the very existence of many enterprises. This report delves into the challenges faced by these businesses, using Wild Rye, an Idaho-based womenS outdoor apparel brand, as a case study.

Wild Rye’s Struggle: A Microcosm of a Larger Problem

Cassie Abel, founder of Wild Rye, launched her company in 2016 after identifying a gap in the market for women-specific outdoor clothing. After years of hard work, the company became profitable in 2021. Now, Wild Rye faces a new and perhaps devastating challenge: tariffs. Abel anticipates $700,000 in purchase orders arriving in July, representing the brand’s complete autumn collection, ordered from Chinese suppliers in December. However, these orders will now be subject to an estimated $1.2 million in tariffs.

I don’t have the money to pay for these rates.These rates are due to entry into the contry. I will not have time to sell this product before the rates are made. We could be out of service in the next four months.
Cassie Abel, Founder of Wild Rye

This situation highlights the precarious position many small businesses find themselves in. The tariffs, imposed on goods entering the country, are due before the products can be sold, creating a significant cash flow problem. For Wild rye, this could mean closure within months.

The Macroeconomic Impact: Tariffs and Small Business

The current governance’s tariff policies, initiated with the aim of encouraging domestic production, have had unintended consequences for small businesses. While the intention may be to bring manufacturing back to the United States, the reality is that many industries rely on global supply chains. According to the Small Business Administration (SBA), small businesses account for 44% of U.S. economic activity. These businesses employ nearly half of the American workforce, making their struggles a significant concern for the overall economy.

Navigating the Storm: Coping Strategies and Their Limits

in response to the tariff pressures, Wild Rye has implemented several cost-cutting measures, including freezing hiring, pausing wage increases, and halting new product development. The company is also forced to raise prices on its autumn products by 10 to 20 percent. These measures,while necessary,have limitations. Raising prices could deter customers, while cutting back on investment could hinder long-term growth.

The U.S. Chamber of Commerce has also advocated for tariff exemptions for small businesses, but these efforts have been unsuccessful. The administration’s stance remains firm, prioritizing the return of industrial jobs to the United States.

The goal here is to bring high quality industrial works back to the United States. President Trump is interested in the work of the future, not in the work of the past.
Scott Besent, United States Treasury secretary

The “Made in the USA” Dilemma: A Lack of Viable Alternatives

Wild Rye initially attempted to manufacture its products in the United States, but found it financially unsustainable. The lack of domestic capacity for producing technical clothing forces companies to rely on overseas suppliers.

This almost returned the business before launching because the United States simply do not have the ability or ability to produce technical clothing.
Cassie Abel, Founder of Wild Rye

This reliance on foreign manufacturing is widespread. The United States imports approximately 97 percent of its clothing, primarily from Asian countries, including China, Vietnam, and Bangladesh. The lack of viable domestic alternatives leaves businesses vulnerable to the impact of tariffs.

Seeking Solutions: A Call for Action

Cassie Abel, along with other members of the outdoor clothing community, met with Washington leaders to advocate for assistance. However, finding a solution remains challenging, given the current political climate. The situation underscores the need for a thorough approach that addresses the concerns of small businesses while also promoting economic growth.

I was listening to him [concern] on both sides of the corridor. Ther is frustration, it is as if it were difficult to find a journey forward. everyone understands that small businesses will crumble and everyone feels as if there is not a playbook for this.
Cassie Abel, Founder of Wild Rye

Economic Uncertainty Weighs on Small Businesses

The current economic climate presents significant challenges for small businesses, especially those relying on imported ingredients. Recent data paints a concerning picture: the U.S. GDP experienced a contraction in the first quarter, declining by 0.3% after a 2.4% increase in the previous quarter, according to the United States Department of Commerce. Moreover, job growth has slowed, with ADP reporting an increase of only 62,000 jobs, a stark contrast to the department of Labor’s figures of 177,000 jobs added the previous month. This immediate metric shows a concerning trend.

Adding to the pressure, consumer confidence has plummeted to a 13-year low, leading to reduced spending as consumers worry about escalating costs. This pullback affects a wide range of businesses, from outdoor clothing retailers to specialty food vendors.

The Squeeze on Specialty Food Brands

For businesses like Brooklyn Delhi and Anjali’s Cup, which rely on unique, globally sourced ingredients, the economic downturn is particularly acute.These companies face the dual challenge of rising import costs and decreased consumer spending.

The brand’s identity is intrinsically linked to its use of authentic ingredients sourced from around the world. As Agrawal explains:

We are creating these authentic indian products that require ingredients that are not cultivated or available on a large scale in the United States. In a certain sense it puts us in a difficult place.
Chitra Agrawal, Brooklyn Delhi

Agrawal estimates that 65% to 70% of their ingredients are imported, primarily from India, with additional sourcing from Mexico, Sri Lanka, and China (for glass packaging).

According to Tridge, a global food supply data analysis company, the United States was the largest importer of ginger and various types of tea, including black and green tea, in 2024. This reliance on imports makes brands like Anjali’s Cup particularly vulnerable to rising costs.

I will have to pay the rates on those things if it is, if I wont to continue making those products. [Not being able to make these products] It is indeed not negotiable for me.
Anjali bhargava, Anjali’s Cup

Strategies for Survival: Adapting to the New Reality

Faced with these challenges, small businesses are exploring various strategies to mitigate the impact of rising costs. Bhargava, such as, is actively seeking domestic alternatives for packaging, a significant expense. Previously, Anjali’s Cup imported tins from China, but once current stocks are depleted, she may have to discontinue four to six of her 11 products due to the prohibitive cost of importing new packaging.

“Basically, to maintain the business in motion, I am forced to undertake a complete review of my retail package [which can be produced stateside] Which means redesign, re-photographer and this involves a cost,” added Bhargava.

This shift requires a complete overhaul of her retail packaging, including redesign and re-photography, incurring unexpected costs ranging from $10,000 to $20,000, which will further erode already thin profit margins. as the sole full-time employee, Bhargava relies on freelancers and outsourcing for tasks ranging from packaging to delivery.

The Unavoidable Price Hike

Unlike larger corporations, small businesses have limited capacity to absorb increased costs. This frequently enough leads to the unavoidable consequence of price increases for consumers. The current economic climate demands resilience and adaptability from small businesses as they navigate these turbulent times.

The Looming Impact of Increased Import Costs

A new wave of import tariffs is poised to disrupt the economic landscape, particularly for small businesses and consumers. As these tariffs take effect, concerns are mounting about potential price increases and the ability of smaller enterprises to absorb the added costs. the situation is prompting businesses to strategize, with some resorting to stockpiling in anticipation of the changes.

Small Businesses Face a Tightrope Walk

For small businesses operating on thin margins, the prospect of increased import costs presents a significant challenge. Alexis D’Amato, director of government affairs for a small business advocacy group, emphasizes the difficulty these businesses face in balancing costs. Many are grappling with the decision of whether to absorb the higher expenses or pass them on to consumers, a choice no one wants to make.

we have seen that it is difficult for small businesses to balance these costs as they have very small margins. They are those who will be affected more hard.

Alexis D’Amato, director of government affairs for small businesses

This situation is particularly concerning given that small businesses are vital to the US economy. According to the Small Business Administration, they account for 44% of US economic activity.

The Sticky Nature of Price increases

A key concern is that price increases, once implemented, may not easily revert even if costs decrease.The COVID-19 pandemic offered a stark example of this phenomenon. Supply chain disruptions forced producers to raise prices, but even after those disruptions eased, many food stores maintained higher prices due to continued consumer willingness to pay. This raises questions about market forces and the potential for prices to remain elevated even after the initial cost pressures subside.

Once that change and say at a certain point, I want to restore those price increases, there is no guarantee that on the shelf, the prices will decrease. It is very difficult when you are working with the grocery stores to drop the prices again. We must really be very careful of this move. We are still contemplating it.

Brooklyn’s Agrawal

Stockpiling as a Short-Term Strategy

In response to these looming concerns, both consumers and companies have been importing goods in advance of the tariff implementation. This stockpiling strategy aims to secure key items and mitigate the immediate impact of rising prices,at least temporarily. Data indicates a significant surge in imports during the first quarter, reflecting this proactive approach.

US imports increased by 41.3 percent in the first quarter of 2025, signaling a rush to acquire goods before the full effect of the tariffs is felt.

A Real-World Example: Tallon Electric

Sean Mackowski, owner of Tallon Electric, a guitar pedal manufacturer in Columbus, Ohio, exemplifies this trend. His company has been actively stocking up on supplies to buffer against the anticipated price increases.

We made the fact of making a lot of stocking up. I think everyone has done their best to climb, hoping that this collides with the gap to this to go away.But if we get to the end of that bridge, we will have to find a different way or we will start running out of things.

Sean Mackowski, owner of Tallon Electric

However, Mackowski acknowledges that this strategy is not sustainable in the long term, and alternative solutions will be necessary if the tariffs persist.

Looking Ahead: Navigating Uncertainty

The introduction of these new import tariffs creates a climate of uncertainty for businesses and consumers alike. While stockpiling offers a temporary reprieve,long-term strategies will be crucial to navigate the evolving economic landscape. The potential for sustained price increases and the challenges faced by small businesses warrant close attention as the situation unfolds. The coming months will be critical in determining the ultimate impact of these tariffs on the US economy.