As a small business, it can be difficult to estimate the exact impact certain large-scale events may have on your business. On the one hand, you know that certain pieces of legislation or government actions will have relatively clear impacts on your business. On the other hand, though, certain events or actions may not directly affect your business. Instead, the effects might trickle down or reach your business in more indirect ways. This can make it somewhat difficult to know their exact impact and find ways to prepare for these sorts of things. This especially applies to actions that happen on a nationwide scale, when certain decisions or events feel like they are happening far from where your business is.
At Payday HCM, we understand that it’s not easy to fully break down the impact some things may have on your business. We have plenty of our clients come to us with questions regarding a variety of different occurrences, whether they be smaller, more localized events or large-scale nationwide happenings. For many small businesses, the news of tariffs has likely been hard to gauge in terms of how your business might be impacted by them.
That’s why, in this article, we’ll be going over how tariffs impact small businesses. We’ll start by covering what tariffs are and the recent tariffs that have gone into effect. Then, we’ll dive deeper into the different effects that tariffs can have on small businesses, including how they affect the cost of imported goods and the demand for domestically produced goods. Finally, we’ll go over some ways small businesses can assess the impact tariffs might have on their businesses specifically. By the end of this article, you’ll have a better understanding of how tariffs affect small businesses and a good starting point for helping your business understand the road ahead.
In this article, you will learn:
What Are Tariffs?
Before jumping into the details of how tariffs can impact small businesses, we’ll go over what tariffs are and how they work.
What is a Tariff?
A tariff is a tax that is imposed on a country’s imported or exported goods by the government. Typically, a tariff is collected by the customs authority of the country that imposes the tariff. In the United States, the U.S. Customs and Border Protection agency collects any duties, taxes, or fees, including tariffs, that might be imposed on any imported or exported goods.
Generally speaking, there are three different types of tariffs (although there may be any number of different duties, taxes, or fees on a country’s imports and exports):
- Ad valorem tariff: a tariff levied on a certain good based on the value of the product. For example, a 10 percent tariff levied by the U.S. government on Japanese automobiles.
- Specific tariff: a fixed amount charged per unit of the imported or exported good i.e. a $2 tariff for every ton of steel.
- Compound tariff: a combination of an ad valorem and specific tariff.
Countries use tariffs for a variety of reasons. Given that tariffs are taxes paid to the government, they serve as a form of revenue for the government. Tariffs can also be used to protect domestic industries from foreign competition as well as discourage the consumption of foreign goods.
Tariffs in the Second Trump Administration
U.S. President Donald Trump has levied a number of tariffs during his second administration, including a 50 percent tariff on steel and aluminum, a 50 percent tariff on copper imports, a 25 percent tariff on foreign-made cars and other automotive parts, as well as ad valorem tariffs on goods imported from individual countries.
On August 29, 2025, President Trump’s suspension of the de minimis tax exemption for imports valued at $800 or less went into effect. On the same day, the U.S. Court of Appeals in Washington, D.C. ruled 7-4 that certain tariffs enacted under the International Emergency Economic Powers Act (IEEPA) are illegal. The court has allowed the tariffs to remain in place until October 14, 2025, to give the Trump Administration time to file an appeal with the U.S. Supreme Court.
How Do Tariffs Affect Small Businesses?
Now that we understand more about what tariffs are and the state of tariffs currently in the U.S., we can take a deeper look at how they work and how they can impact businesses.
Who Pays Tariffs?
As stated earlier, any duties, taxes, or fees are paid to the customs agency of whichever respective country imposes the tariffs. This means that, in order for imported goods to enter the country, these duties, taxes, and fees, including tariffs, must be paid by the person or business who is importing or exporting the goods.
Much like the other costs associated with running a business or producing and selling goods, the costs associated with creating or procuring said goods are baked into the final price that the consumer pays. This means that imported goods may see an increase in prices in order to offset any tariffs or other increased duties.
Potential Impact of Tariffs on Small Businesses
Taking everything from above into account, tariffs can impact businesses in multiple ways. For businesses that import most of their goods from other countries or import goods with specific tariffs levied on them, the price for importing these goods will go up. There are potential supply chain impacts as well, alongside the increased importing cost.
Looking inward, businesses that operate domestically and largely sell goods domestically may see an increase in business as tariffs encourage businesses to source goods domestically as opposed to importing. Businesses may also see customers opt to buy more domestically-produced goods as the cost of imported goods may increase in order to offset the cost of tariffs.
How Small Businesses Can Navigate Tariffs
There are certain actions small businesses can take to ensure your business is ready for both the potential upsides and downsides of tariffs.
Assess How Tariffs Impact Your Small Business
Not every business will be impacted by tariffs in the same way. For businesses in industries with competition from foreign producers and imported products, you may experience an increase in business as certain businesses switch from foreign to domestic producers. If your business imports a large amount of its goods, you may need to prepare for an increase in costs associated with importing those goods.
Either way, you should assess your business’s supply chain to identify potential areas where you can diversify your suppliers. On top of this, finding domestic suppliers or, in some cases, suppliers in countries with lower tariffs that produce quality goods can help your business to avoid paying tariffs or pay lower tariffs for imported goods. Businesses can also try to negotiate lower prices with your current suppliers.
Cutting Costs, Raising Prices, and Staying In the Know
On top of the supply chain considerations, businesses can look for other ways to reduce spending costs and streamline operations. Of course, raising prices is also always an option, but this should be accompanied by clear communication with clients and customers about when, why, and by how much you are raising prices.
In the U.S., the status of certain tariffs may still be uncertain due to certain legal proceedings and other events. Businesses should keep a close eye on the status of tariffs in order to retain a clear understanding of how tariffs might affect your business.
Understanding the Relationship Between Tariffs and Small Businesses
Understanding the details of how different legislative actions interact with small businesses can be tricky, especially when it comes to certain rules or regulations that are at the state or federal level. Of course, that doesn’t make this understanding any less crucial, as these different pieces of legislation or legislative actions can have a variety of impacts on small businesses. With the information provided in this article, you’ll have the foundation to continue your journey of understanding and help your business stay compliant and prepared.
Taking a moment to step back and reevaluate how your small business operates can help reveal areas for potential improvement. While several different areas could be assessed to find ways to improve or streamline certain aspects, your relationship with your payroll provider is one that can be easy to forget about. After all, if it’s a good relationship, why worry? Still, though, it can be good to ask questions to make sure you’re still receiving the best service possible for the amount you’re paying. Check out our article for the three conversations you need to have with your payroll provider to ensure your business is still on the right track.
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