Small businesses make up 97% of all U.S. importers, and they are the ones carrying the weight of the 2025 to 2026 tariff regime. New York Fed research shows U.S. firms and consumers absorbed close to 90% of the $264 billion in tariff costs collected in the first year, with importers bearing the largest share. For operators running companies under 500 employees, a real tariff survival strategy has stopped being a policy conversation and become a weekly operating decision about pricing, sourcing, and cash.
The average small-business importer paid roughly $306,000 more in tariffs over the last 12 months, or about $25,000 a month. That is not a line item you absorb with a pricing memo. It resets how you hire, how you pay people, and where you source from for the next three years.
What the new Fed data actually shows
The Federal Reserve Bank of New York’s Liberty Street Economics analysis found that from January through August 2025, U.S. importers bore 94% of tariff costs. By November, foreign exporters were eating a bit more of the bill, but U.S. importers were still on the hook for about 86%. The idea that “foreign countries pay the tariff” does not survive contact with the receipts.
Layer in the small-business specific numbers from the Center for American Progress and the picture sharpens. Of the 242,515 U.S. importers, 236,045 are small businesses. For every dollar of tariff cost in the most exposed industries, operating margins at small importers fell by about 34 cents even after they raised prices.
The average effective U.S. tariff rate is now roughly 17%, the highest level since the Smoot-Hawley era. Chinese imports face stacked duties that in many categories exceed 100%. These are not macro abstractions. They land on purchase orders.
What this means for managers and teams
The first thing it means is that hiring plans written in late 2024 are mostly dead. About 22% of small businesses have already delayed planned investments or hiring because of tariff uncertainty, and 38% report active cash-flow strain tied directly to duty payments. When $25,000 a month leaves the bank account for customs, you do not backfill that role you were going to open in Q2.
It also means middle managers are now the ones doing trade policy work. The operations lead who used to run a weekly vendor call is suddenly responsible for HTS code audits, bonded-warehouse evaluations, and scenario models for three different tariff outcomes. Leaders who want to keep those managers from burning out should read our piece on tariff pricing strategies for small business and rebuild the role with realistic scope.
Teams also need clearer decision rights. Procurement, finance, and sales are all making tariff calls, often in contradiction with each other. If nobody owns the call on whether to pass costs through, pre-buy inventory, or renegotiate supplier terms, you will do all three badly.
What leaders should do now
Most operators I talk to are not short on ideas. They are short on sequencing. Here is the rough order of operations that seems to separate the companies stabilizing from the ones stalling, drawn from conversations with small importers and the current Fed data.
- Map real exposure first. Pull the last 90 days of purchase orders, tag each line by country of origin and HTS code, and calculate landed cost under current and plausible future rates. Most operators find the actual exposure is concentrated in a few SKUs, which changes the strategy entirely.
- Get a customs broker on the phone this month. A 30-minute call often surfaces HTS reclassifications, first-sale valuation opportunities, or foreign-trade-zone options that can cut effective duty meaningfully. Our guide to how larger firms are financing the adjustment shows how capital partners are thinking about the same problem.
- Split the pricing decision into two moves. Raise list prices on the SKUs where demand is inelastic, and introduce a transparent tariff surcharge on the rest so customers understand what is driving the change. Blending both into one generic price hike burns goodwill you will need later.
- Qualify a second country of origin for your top three input categories. You do not need to switch. You need optionality, because the thing that kills small importers is being locked into one source when the rate doubles overnight.
- Rewrite the hiring plan around a 12-month cash buffer, not a 6-month one. If duties stay where they are, the companies that survive will be the ones who stopped trying to grow headcount through the storm and instead preserved the team they already have.
Broader context and what to watch
The broader signal from the 2025 to 2026 data is that small importers are absorbing a policy cost the political conversation assumed would land somewhere else. Fortune’s reporting on the Fed’s small-business survey describes it plainly: most of these companies entered 2025 with thin margins, and they do not have the capital to wait out another year of uncertainty.
Watch three things over the next two quarters. First, whether the Supreme Court’s pending rulings on IEEPA tariff authority reshape the rate structure. Second, whether domestic suppliers who raised prices citing their own input costs hold those prices if import duties soften. Third, whether small importers who diversified sourcing in 2025 actually see the margin recovery they are modeling, or whether the new suppliers quietly raise prices to match.
The companies that treat this as a one-year problem and wait it out will look very different in 2027 from the ones that rebuilt their sourcing, pricing, and cash planning around the new baseline.
My take
I think the instinct to treat tariffs as a temporary tax is the single biggest strategic error a small importer can make right now. The rate may move, the categories may shift, but the era of frictionless global sourcing for a 10-person company is over for the foreseeable future. Operators who accept that and rebuild the business around it, including slower hiring, thicker cash reserves, and dual-source everything that matters, will be the ones still standing when the next shock hits. The ones waiting for normal to return are paying $25,000 a month to avoid a conversation they need to have with themselves.