Retailers are most likely to switch to domestic suppliers because of tariffs
April 16, 2025
Key takeaways:
- Nearly aquarter of smaller businesses fearedtariffs couldforce them to go to under before Trump announced even tougher taxes.
- Half of small businesses saidthey would be directly hitby tariffs before the trade war with Chinaescalated.
- Consumers would be left with fewer options and millions of jobs would be lost ifsmall businesses go under because of tariffs.
Many small businesses worriedthey would go underbefore President Trumpescalated the trade war with China, raising concerns that millions of jobs will be lost and consumers left with fewer local options.
Around 7% of small-or-medium-sized business said it was “slightly or not at all likely” they would survive the next two years because of higher costs due to tariffs and 17% said it was “somewhat likely” they would survive, according to a February survey by PYMNTS Intelligence.
Small businesses are generally defined as havingfewer than 100 employees, while medium-sized businesses are between 100to 999 employees.
Small businesses employed nearly 62 million people in 2023, according to the Small Business Administration.
Tariffs are essentially taxes on imported goods that companies pay and will likely be passed onto consumers or force companies to go out of business.
Fears among small businesses from tariffs came before Trump increasingly boosted the taxes on goods coming fromChina, the U.S’s biggest supplier of imported products,suggesting that worries may now be higher as the industry waits for moresurveys to roll in.
In February, Trump placed 25% tariffs on Canada and Mexico and 10% tariffs on China.
Then on April 2, Trump said there would bea10% tariff on all countries and higher tariffs on nations with bigger trade deficits, meaning countries the U.S. imports more from than exports to.
Since then, more than 75 nations have reached out to discuss trade deals and the U.S. has paused the 10% universal tariffs to make room for negotiations,the White House said.
But the Trump administrationsaid Tuesday it was increasingthe tariffs on importsfrom China byup to 245% after the country retaliated with its own tariffs.
China is by far the main source of imported goods for small businesses.
Some 35% of small businesses used goods madeoutside the U.S. and86% of those businssesimported products from China or Hong Kong, according to a December to January surveyby the National Small Business Association.
The NSBA said around half of small businesses would be impacted by the tariffs, but they said this before taxeswere set and have increasingly shifted.
Furthermore, beyond those directly or even indirectly impacted, there are growing concerns about overall economic stability and what that means for business sustainability and growth, the ability to access financing and a whole host of other factors that stand to disproportionately harm small business when there is economic churning or unrest,” said Molly Day, NSBA vice presidentof public affairs, in a statement.
Trump argues that tariffs will boost U.S. manufacturing and make the countryless dependent on China during crises, such as the coronavirus pandemic that halted global supply chains.
But Trump’sgoal is having a mixed response from smaller businesses.
The retail industry is the most likely to replace foreign suppliers with domestic ones, with 36% of smaller businesses saying they would make the switch, according to the PYMNTS survey.
Hotels and restaurants will negotiate with suppliers and use alternate materials, the survey said, while professional services firms were the least likely to have a plan to respond to tariffs, but they rely the least on imported goods.
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