Small businesses across America are grappling with unprecedented challenges as tariff policies reshape the economic landscape. While media coverage often focuses on large corporations and their responses to trade tensions, the real story lies in how these policies affect the cornerstone of America’s economy: small and medium-sized businesses.
Revenued’s Q3 Tariff Impact Survey provides a comprehensive look at this developing crisis, particularly the sectors hit hardest by tariffs. The research, conducted among 131 small to medium-sized businesses, reveals that 67% of SMBs have been directly impacted by tariffs in the past 12 months. These impacts go beyond simple cost increases, creating ripple effects that touch every aspect of operations.
The data paints a clear picture: Certain industries and regions are bearing a disproportionate burden as tariff policies create winners and losers in the small business community.
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Construction Leads the Most Affected Sectors
Construction companies represent the hardest-hit sector, with 78% reporting direct tariff impacts. This industry’s vulnerability stems from its heavy reliance on imported raw materials, especially copper, steel, and lumber. When tariffs drive up the cost of these essential inputs, construction firms see an immediate squeeze on already thin margins.
Construction projects operate on fixed contracts negotiated months in advance, making it difficult to pass increased material costs to customers. Many contractors find themselves absorbing significant losses or struggling to renegotiate existing agreements.
Supply chain disruptions compound these financial pressures. Delayed shipments of materials can halt entire projects, creating cascading effects on schedules and cash flow. Construction business owners report stockpiling materials when possible, but this strategy requires significant capital investment and storage capacity that many SMBs lack.
A Texas-based contractor shared their experience in the survey: “Copper wire costs spiked 25% in two months, and we had to stockpile materials just to control prices.” This pattern of preemptive purchasing has become common as businesses attempt to hedge against further cost increases.
Manufacturing Sees Complex Supply Chain Disruptions
Manufacturing businesses rank second among the sectors hit hardest by tariffs, with 74% reporting significant effects. However, the effects vary considerably across different subsectors, each facing unique challenges based on their supply chain dependencies and product mix.
The pressure is particularly acute for medical equipment manufacturers. Specialized components used in medical devices usually originate from overseas suppliers, and domestic alternatives often don’t exist or require lengthy certification processes. These companies have to balance rising costs with the critical nature of their products and the regulatory requirements that govern their industry.
Automotive parts manufacturers face similar supply chain complexity. The auto industry’s just-in-time manufacturing model means that even small delays or cost increases can disrupt entire production lines. Many SMB auto suppliers report being caught between pressure from larger manufacturers to maintain pricing and their own rising input costs.
Furniture manufacturing presents another distinct problem. While some furniture components can be sourced domestically, others — specifically hardware, specialized fabrics, and certain wood species — rely heavily on imports. Furniture manufacturers also face the additional challenge of competing against fully imported finished goods that may be subject to different tariff rates than their component materials.
The owner of a manufacturing business in Ohio noted: “It feels like we’re constantly chasing new rules. We can’t plan ahead, and every delay hurts our customers.” This uncertainty has forced many manufacturers to maintain larger inventory buffers, tying up working capital and increasing storage costs.
Retail Struggles with Margin Compression
Retail businesses occupy a unique position in the tariff landscape, with 68% reporting significant impacts. Unlike manufacturers who can sometimes adjust their sourcing strategies, retailers often depend on finished goods imports and deal directly with consumer price sensitivity.
Consumer goods retailers, notably those selling imported electronics, home goods, and appliances, report the most severe margin compression. These businesses typically operate on relatively thin margins and find themselves squeezed between rising wholesale costs and price-sensitive consumers. Many retail SMBs report absorbing tariff-related cost increases rather than passing them fully to customers, fearing loss of market share to competitors.
A retail business owner from Florida explained the dilemma: “We can’t keep raising prices without losing customers, but costs keep going up. We’ve already cut our margins in half this year.”
The apparel and toy sectors run into seasonal pressures as well. These businesses often place orders months in advance for seasonal merchandise, making it difficult to adjust quickly to tariff changes. When costs increase unexpectedly, these retailers may find themselves locked into unprofitable inventory purchases.
Wholesale businesses serve as intermediaries in many supply chains, making them especially vulnerable to tariff disruptions. Wholesalers often work with smaller margins than direct retailers and may lack the market power to negotiate favorable terms with either suppliers or customers when costs increase.
Service-Based Industries Experience Indirect Effects
While service-based businesses might seem insulated from trade policy, 41% report indirect tariff impacts through inflation-driven costs and vendor price increases. Professional services, IT companies, healthcare providers, and educational institutions all face rising operational costs as their suppliers and vendors pass through tariff-related expenses.
IT service companies report increased costs for hardware and equipment needed to serve clients. While these businesses don’t directly import goods, their equipment suppliers do, and those costs eventually flow through to service providers. This creates a delayed but persistent pressure on IT service margins.
Healthcare services endure similar challenges through medical equipment and supply costs. While patient care is still the priority, rising operational costs strain already tight healthcare margins, particularly for smaller practices and specialized clinics.
Professional services firms report increased costs for office supplies, equipment, and even basic operational necessities as tariffs affect a broad range of imported goods. These seemingly small increases can accumulate into significant operational pressures for service-based SMBs.
Regional Disparities Tell a Tale of Two Coasts
Geographic location plays a crucial role in determining the severity of tariff impacts. Coastal states with stronger import dependency — including California, New York, and Florida — experience substantially higher disruption rates, with 72% of coastal SMBs reporting tariff-related delays versus 58% in inland states.
This disparity reflects fundamental differences in supply chain structure and business model dependencies. Coastal businesses have historically leveraged their proximity to major ports to access diverse international supplier networks. When tariffs disrupt these relationships, coastal SMBs struggle to adapt.
Inland businesses, while not immune to tariff effects, often maintain more diverse supplier relationships that include domestic sources. This geographic diversification provides some protection against trade policy disruptions, though it doesn’t eliminate the impact entirely.
The regional variation also reflects industry concentration patterns. Manufacturing-heavy regions in the Midwest and South may face different pressures than technology and service-concentrated coastal areas, creating a patchwork of economic effects across the country.
A Resilient Outlook for the Future
Despite current challenges, small business owners remain surprisingly positive about the future. The Revenued survey data shows 88% of SMBs expressing confidence about the next 12 months, with 68% planning to invest in business growth through equipment purchases, expansion, or hiring.
This optimism reflects the resilient nature of small business owners and their ability to adapt to changing circumstances. However, it also highlights the disconnect between immediate operational challenges and longer-term business confidence, suggesting that many SMB owners view current tariff effects as temporary disruptions rather than permanent structural changes.
Strategic planning has become more complicated as businesses attempt to balance growth investments with the need for operational flexibility. Many SMBs report adopting shorter planning horizons and building more contingencies into their business models to accommodate potential policy changes.
Navigating the Road Ahead
The sectors hit hardest by tariffs — construction, manufacturing, retail, and even service-based businesses — share common challenges but require tailored solutions. Understanding these industry-specific impacts provides crucial context for business owners, policymakers, and financial service providers working to support SMB resilience.
