The Center for American Progress dropped their analysis last week. Small-business importers paid an average of $306,000 more in tariffs over the past twelve months compared to the year before. That's not a rounding error. That's four or five full-time salaries that evaporated into customs duties instead of payroll.
If you run a business with fewer than 50 employees, your number was closer to $175,000 more. If you're in Kentucky, Michigan, or Tennessee, it was north of $650,000.
JPMorgan confirmed it from their side. Monthly tariff payments for midsize firms tripled compared to early 2025. And 96% of that cost fell on U.S. businesses and consumers. Not the exporting countries. Us.
The reshoring pitch didn't land
The stated goal was to bring manufacturing back. The Fed surveyed over 6,500 small businesses in March and the results are brutal. Only 13% found domestic suppliers. A mere 3% successfully reshored any production.
That math isn't complicated. 87% of businesses couldn't switch suppliers. 97% couldn't reshore. The reshoring story works if you're a Fortune 500 company with capital to build a factory. It doesn't work if you're a 15-person operation importing components.
So what did businesses actually do? 76% passed at least some cost to customers. But JPMorgan found that by October 2025, only 43% of the total tariff cost had been passed through to consumer prices. The rest? Absorbed. Margin compression. Money that used to fund growth now funding customs invoices.
Your hiring budget is gone
The Atlanta Fed put numbers on the hiring damage. Businesses planned to slow hiring by 13% and cut investment by 16% over six months. More than 5% of firms planned to cut hiring by 90% or more. That's a hiring freeze in everything but name.
The Kansas City Fed estimated 19,000 fewer jobs per month. Monthly job growth cut roughly in half compared to 2024.
Small businesses used to be the engine. They drove 53% of post-pandemic job creation. Now the money earmarked for that next hire is sitting in a customs account.
Average monthly duty payments jumped from $8,400 to $27,200. That's a 224% increase in twelve months. On single-digit net margins, that's not survivable without changing something fundamental about how you operate.
The Supreme Court agreed, and it didn't matter
Here's the part that doesn't get enough attention. On February 20, the Supreme Court ruled 6-3 that the IEEPA tariffs were unlawful. They terminated four days later. But by then, over $170 billion had already been collected.
The administration immediately imposed a 10% "temporary import surcharge" under a different legal authority. Section 122, which has a 150-day statutory limit. So there's another cliff coming around July.
Nearly 2,000 importers filed refund cases for what they paid under the illegal tariffs. Justice Kavanaugh called the refund situation a "mess." If you're a small business that already paid, you're not holding your breath for that check.
The system failed these businesses twice. Once when it charged them. Again when it couldn't give the money back.
Raising prices isn't a strategy
I keep seeing the advice to "just pass it through." Add a tariff surcharge line item. Some businesses are doing exactly that, transparently listing tariff costs on receipts. I respect the honesty.
But it's not a long-term play. Your customers are dealing with the same cost pressures. The bridal shop owner in Pennsylvania is reprinting price tags in real time as dress designers raise wholesale prices. She's not importing anything directly. The tariffs cascade.
If your response to a permanent cost increase is a permanent price increase, you're betting that your customers have infinite tolerance. They don't. The 61% of small businesses reporting negative operational impact in the NSBA survey aren't all going to survive by charging more.
The businesses that survive this are running differently
When you can't switch suppliers, can't reshore, and can't hire, the remaining variable is how efficiently you operate with what you have.
I'm not talking about cutting corners. I'm talking about eliminating the manual work that eats hours and margin but doesn't generate revenue.
The Fed survey confirmed a rising share of small businesses are turning to automation and AI tools to increase productivity. Section 179 lets you deduct up to $1.22 million in tech investment this year, which makes the math even clearer. The money you're losing to tariffs could be partially offset by the money you stop losing to inefficiency.
We built our entire operation around this principle. Two people running what would typically require a 10-14 person team, not because we're working 14 jobs worth of hours, but because we automated the roles we didn't have people for. Our internal system handles content operations, security assessments, client tooling, and workflows that would otherwise need dedicated staff.
That's not unique to us. It's the same logic available to any small business willing to look at their operations honestly. Where are you spending human hours on work that doesn't require human judgment? That's your tariff offset.
What $306,000 could have bought
Four to five full-time employees. A complete technology overhaul. A new product line. A year of R&D.
Instead it went to customs duties under tariffs that the Supreme Court later said were illegal. And the replacement tariffs expire in a few months, creating yet another round of uncertainty.
You can't control trade policy. You can control how lean your operation runs when the next shock hits. The businesses that come out of this aren't the ones who raised prices fastest. They're the ones who stopped needing as many billable hours to deliver the same output.
We work with small businesses on exactly this. Figuring out where automation and better tooling replace manual overhead. First conversation is free, no commitment. Get in touch.
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