Tariffs Leave Small Businesses Stretched to the Limit
Confidence among America’s small businesses is reportedly falling amid new U.S. tariffs.
That’s according to a report Saturday (March 22) by The Wall Street Journal (WSJ), which said more than 40% of small business owners said economic conditions had deteriorated compared to last year, up from 22% in February.
Among the small businesses profiled in the report is Los Angeles’ Quake City Casuals, a headwear company that absorbed about half the cost of President Donald Trump’s 10% tariff on Chinese imports last month, and stockpiled $500,000 of inventory before they went into effect.
All the same, Quake City’s sales are down 40% this year. John Glucksman, the company’s president, told WSJ he has reduced his employees’ hours. Job cuts could follow if business doesn’t pick up by the end of the month.
“There is only a limited amount of things we can do to reduce our costs,” he said.
As WSJ noted, smaller businesses have fewer options available to them than their larger counterparts when it comes to dealing with a trade war. That’s left many of these companies cutting costs and holding off on expanding. And like Quake City, some are weighing layoffs.
The WSJ’s findings are in keeping with recent PYMNTS Intelligence research showing that all but a small minority of small businesses see the tariffs as a negative, with more than two-thirds expecting the levies to drive up raw material costs or lead to product shortages.
Meanwhile, forthcoming research by PYMNTS Intelligence shows that about half of small and medium-sized businesses (SMBs) depend on immediate sales or existing cash for survival, with business credit cards serving as the most common form of financing for those with access.
“Those without access to financing are significantly less confident in their ability to adapt to a changing economic environment and are 75% more likely to have no plan to offset any costs arising from the implementation of tariffs,” PYMNTS wrote last week.
“This stark reality contributes to a heightened sense of uncertainty, as SMBs lacking financing express less confidence than those that do in their survival over the next two years.”
Underlining their tenuous position, SMBs already facing financial strains are more likely to use financing out of necessity than for strategy growth. Of the companies that have used financing in the past year, businesses that are “slightly or not at all likely” to survive display a higher tendency to use it primarily out of necessity (43.2%) versus more stable SMBs.
“This suggests a significant portion of the SMB ecosystem is operating in survival mode and is ill-equipped to weather potential tariff storms and economic downturns,” PYMNTS wrote.
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