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How Trump’s tariffs are already impacting U.S. small businesses
Since the Trump administration took office on January 20, immense changes have overwhelmed business owners of all sizes. Perhaps most impactful are the tariff policies President Trump was touting before election and is now enacting—theoretically to prioritize American business, but possibly upending businesses of all sizes. As the founder and CEO of Percent, a private credit investment platform that has facilitated over $1 billion in financings for small businesses, I’ve had a front-row seat to how policy changes directly impact financing needs and capital access for small businesses across the country. Slated to go into effect before being postponed twice—and recently implemented on steel and aluminum imports, with more threats by the day—this back and forth has only added to the uncertainty facing business owners trying to plan ahead. The ongoing ambiguity is itself a major burden, leaving many businesses in a lurch as they wait to see whether to adjust pricing, inventory, and supply chain strategies. Trump has sought to throw 25% tariffs on all Canadian and Mexican imports, and double the tariffs on Chinese goods to 20%. Such action would heavily impact all goods shipped into the U.S. from these countries—which accounted for 40% of all imports in 2024—mainly including oil and petroleum products from Canada, and electronics from China. The idea behind these heightened costs on imports is to push American consumers to buy goods made in the U.S. and encourage companies to establish their headquarters and operations in the country rather than outsource overseas. Trump has also said that these three countries haven’t done enough to stop the flow of fentanyl into the U.S., and these tariffs are a repercussion. Unsurprisingly Canada, Mexico and China are already retaliating with their own tariffs on U.S. goods, including a 15% border tax on coal and liquefied natural gas products imported from the U.S. Other direct responses include a 10% tariff imposed by China on American crude oil, and 25% tariffs from Canada on $30 billion of American goods including poultry and produce. Disruptions in the Near-Term Immediately, if the rest of these tariffs do go into effect, small businesses relying on imported materials from these three countries will see costs rise across the board. The U.S. sources nearly half of its foreign fuel from Canada, which will have a ripple effect for all businesses and consumers using any type of fuel. (Hint: It’s almost all of them.) Pricing strategies take time to adjust and as a result, businesses will have to face cash flow challenges stemming from these higher costs, creating a strain on consumers with higher prices to help offset impacts. Small businesses will be hit the hardest, as they often lack the market power to fully pass any sort of price increase onto consumers without economies of scale. Inventory management will get complicated as businesses big and small have to decide how and when to allocate capital. Should they stockpile inventory before more increases down the line? Or minimize inventory to preserve cash? With the way things are shaking out, and big changes happening every day, there’s no steadfast right or wrong answer—especially as the administration vacillates back and forth between implementing or rescinding the tariffs. Competition between businesses is also going to grow between larger companies (who can better absorb these tariff costs or negotiate alternative supply arrangements) and those who can’t. These kinds of sweeping changes to operations take time, resources, and administrative skill to navigate, but this is all happening at the drop of a hat. Small business owners will need to navigate sourcing new suppliers, deal with increased paperwork and compliance costs, and decide how and when to use cash reserves to navigate these new regulations. Effects Down the Road These international tariff policies aren’t just going to have short-term effects on the global economy. If they stick around, it’s going to transform business models, market dynamics, and innovation across the globe. President Trump has offered a counter argument that tariffs are designed to help domestic industries as it pushes consumers to buy from U.S. brands but that has largely been proven to be incorrect. Historically tariffs have led to higher domestic prices across the board as imports become more expensive, thereby reducing competition, and subsequently causing prices to increase again as U.S. companies will be able to charge more. We’re going to see forced supply chain disruption away from previously reliable partners, product reformulation to use different inputs unaffected by tariffs, and strategic repositioning in the market based on new cost structures. Requirements for investment will have to adapt to the “new normal” of trade flow. Market sectors may consolidate or close completely based on who can adapt or get acquired. Building relatio
Since the Trump administration took office on January 20, immense changes have overwhelmed business owners of all sizes. Perhaps most impactful are the tariff policies President Trump was touting before election and is now enacting—theoretically to prioritize American business, but possibly upending businesses of all sizes.
As the founder and CEO of Percent, a private credit investment platform that has facilitated over $1 billion in financings for small businesses, I’ve had a front-row seat to how policy changes directly impact financing needs and capital access for small businesses across the country.
Slated to go into effect before being postponed twice—and recently implemented on steel and aluminum imports, with more threats by the day—this back and forth has only added to the uncertainty facing business owners trying to plan ahead. The ongoing ambiguity is itself a major burden, leaving many businesses in a lurch as they wait to see whether to adjust pricing, inventory, and supply chain strategies.
Trump has sought to throw 25% tariffs on all Canadian and Mexican imports, and double the tariffs on Chinese goods to 20%. Such action would heavily impact all goods shipped into the U.S. from these countries—which accounted for 40% of all imports in 2024—mainly including oil and petroleum products from Canada, and electronics from China.
The idea behind these heightened costs on imports is to push American consumers to buy goods made in the U.S. and encourage companies to establish their headquarters and operations in the country rather than outsource overseas. Trump has also said that these three countries haven’t done enough to stop the flow of fentanyl into the U.S., and these tariffs are a repercussion.
Unsurprisingly Canada, Mexico and China are already retaliating with their own tariffs on U.S. goods, including a 15% border tax on coal and liquefied natural gas products imported from the U.S. Other direct responses include a 10% tariff imposed by China on American crude oil, and 25% tariffs from Canada on $30 billion of American goods including poultry and produce.
Disruptions in the Near-Term
Immediately, if the rest of these tariffs do go into effect, small businesses relying on imported materials from these three countries will see costs rise across the board. The U.S. sources nearly half of its foreign fuel from Canada, which will have a ripple effect for all businesses and consumers using any type of fuel. (Hint: It’s almost all of them.)
Pricing strategies take time to adjust and as a result, businesses will have to face cash flow challenges stemming from these higher costs, creating a strain on consumers with higher prices to help offset impacts. Small businesses will be hit the hardest, as they often lack the market power to fully pass any sort of price increase onto consumers without economies of scale.
Inventory management will get complicated as businesses big and small have to decide how and when to allocate capital. Should they stockpile inventory before more increases down the line? Or minimize inventory to preserve cash? With the way things are shaking out, and big changes happening every day, there’s no steadfast right or wrong answer—especially as the administration vacillates back and forth between implementing or rescinding the tariffs. Competition between businesses is also going to grow between larger companies (who can better absorb these tariff costs or negotiate alternative supply arrangements) and those who can’t.
These kinds of sweeping changes to operations take time, resources, and administrative skill to navigate, but this is all happening at the drop of a hat. Small business owners will need to navigate sourcing new suppliers, deal with increased paperwork and compliance costs, and decide how and when to use cash reserves to navigate these new regulations.
Effects Down the Road
These international tariff policies aren’t just going to have short-term effects on the global economy. If they stick around, it’s going to transform business models, market dynamics, and innovation across the globe.
President Trump has offered a counter argument that tariffs are designed to help domestic industries as it pushes consumers to buy from U.S. brands but that has largely been proven to be incorrect. Historically tariffs have led to higher domestic prices across the board as imports become more expensive, thereby reducing competition, and subsequently causing prices to increase again as U.S. companies will be able to charge more.
We’re going to see forced supply chain disruption away from previously reliable partners, product reformulation to use different inputs unaffected by tariffs, and strategic repositioning in the market based on new cost structures. Requirements for investment will have to adapt to the “new normal” of trade flow.
Market sectors may consolidate or close completely based on who can adapt or get acquired. Building relationships with domestic suppliers is going to become crucial, and barriers to entry for small businesses are only going to increase with higher initial capital requirements.
Uncertainty will also dole out an economic toll, as investments stall while waiting to hear what’s next. For small businesses in particular, this “wait and see” environment is more than an annoyance—it drains time, resources, and momentum. Each postponement forces owners to revisit plans, weigh supply chain shifts, and hold off on investments. The repeated reversals create policy whiplash, compounding inefficiencies and heightening the risk of missed opportunities.
At the same time, we will likely see a faster adoption of automation and utilization of AI to offset input costs, and domestic alternatives to imported materials. This will create new business opportunities and potential market segmentation shifts as price points change.
These price point changes will have lasting financial implications, especially for small businesses. When tariffs increase costs for a small business that can’t absorb the financial hike, the structure fundamentally changes. Typically this means increased capital requirements due to fronting inventory costs that they can’t always expect their customers to cover with higher prices. Supply chain disruptions also cause larger inventory buffers, tying up more capital. These lengthened cash conversion cycles will affect not just businesses, but the institutions providing the capital, as well.
Further Evolution of Banking Relationships
Even further into the future, we’re going to see a shift in banking and investments from these tariff increases—and retaliatory effects—with Canada, China, and Mexico. There will likely be a shift from transactional to strategic partnerships; credit structure changes; alternative financing and risk management; and capital structure reconsideration (where businesses will have to reassess their balance between debt, equity, and internal funding to better weather prolonged trade disruptions) as the global economy adjusts.
For small businesses, banking will need to be with institutions that understand their industry’s specific tariff impacts. What this means for banks is that being familiar with international trade dynamics becomes a valuable competitive edge, and more trust-based, consultative relationships will become necessary with increased complexity.
Many businesses, not just smaller ones, will also need to shift from short-term revolving credit to longer-term financing solutions to manage the extended period of adjustment these tariffs will bring. In fact, financing sources all together will change, and businesses might turn to alternate sources such as community development financial institutions (CDFIs) that offer specialized programming for trade policy complications.
New approaches to financial risk, the increased need for documentation and compliance, and rethinking debt-to-equity ratios—the entirety of approaching finances in businesses will be affected, potentially negatively.
The one predictable thing over the course of this administration will be unpredictability—and unfortunately it will likely be small businesses that will have to bear the brunt of this uncertainty.
