How Trump’s Tariffs Are Crushing Small Businesses While Big Retailers Thrive

This was one of our best selling items, but when the tariff started to hit pretty hard in China, we realized the math did not work out anymore. Eunice Byun is the CEO of Material Kitchen, a small business that sells kitchenware for the home. Her business is reeling from tariffs. The complexity of our supply chain has absolutely increased tenfold. Now I've got to go find the best partner in also a region where it financially makes sense. We're not going to yo-yo back and forth because one day it could be a high tariff, the next day it could be a lower tariff. And Byun is not alone. Should we pack up my order? Yeah, yeah. Can we do that? Are you doing cases or singles? Cases to take to the market. Anjali Bhargava runs Anjali's Cup. Her New York City operation sells chai concentrate and turmeric blends online, at Whole Foods and in a handful of metro area coffee shops. Not knowing what's going to happen with these tariffs, it completely changes my ability to compete in the marketplace. Small businesses make up 97 percent of importers in the U.S. and account for a third of the value of all imports. But while those operations are feeling the weight of the tariffs, some of the nation's biggest retailers, including Walmart, Amazon and TJ Maxx, have seen their stock prices surge. So while the announcement initially rocked the sector, many large retailers have been able to mitigate much of the tariff costs. Levi, Ulta, Victoria's Secret, Tapestry, all up their share prices between 48 and 58 percent since April 2nd. Kohl's, Five Below, Elf Beauty, Wayfair, those are all up between 99 and 164 percent. Small businesses are kind of like the canary in the coal mine for what's going to happen to large businesses. If the tariffs persist, eventually large businesses will be hit. So what impact are tariffs having on small businesses and how are larger retailers able to skirt their impact? CNBC spoke with small business owners to find out. This is something we were out of stock on for most of the year. You put your kosher salt up top and then you can put maybe your finishing salt down below. Material Kitchen is a multi-million dollar business that got its start in New York selling kitchenware in 2017. Many of its products, like knives, frying pans and cutting boards, are produced abroad. The company's kitchen shears, for example, are made in China. How have the tariffs impacted that product? So for most of the year, we haven't actually been able to bring it in. One of the complexities about our assortment is there are a lot of steel components. Our items like our kitchen shears or kitchen knives, they have an additional tariff. Not only are you paying the country and the regional tariff, but you're also paying a material tariff on top of that. This past summer, tariffs on steel and aluminum imports doubled to 50 percent for most countries. Tariff stacking is when multiple tariffs are applied to the same imported product. Because of those increased costs, Beyon was forced to move her production. We were able to move a lot up north to Canada. We've also launched a new product of ours that's coming out of Europe. Now, each of those regions have had different levels of tariffs over the last year. So each place you go, it's a new tooling cost. It's a new setup cost. It takes time, money, resources, energy. How much would it cost for you to make these knives here in the U.S.? I think part of the challenge is I'm not even sure we could because of some of the technical capabilities. When we first started, we did try to look at doing something here domestically, but unfortunately, a lot of the factories that had been doing it closed. If tariffs continue, Beyon says margins will be tighter as the retailers she works with look to claw back some of their own tariff-related costs. Scaling the business could also be harder. We have to be smart right now about bringing inventory in just at the right time. And you have to hope that it's actually in the right products, in the right quantities, because if you bring in too much, you're going to be sitting on too much post-holiday. And if you bring in too little, you're missing all the opportunities to sell. It's small businesses, which often have low margins to begin with, if they are facing higher costs. And if they can't fully pass those costs in the form of higher prices to their consumers, then those small businesses ultimately have to lay off people. Material Kitchen has less than 10 employees and sells at Bloomingdale's and Saks Fifth Avenue. About 61 million Americans, or nearly half of the country's private sector employees, work for small businesses. Small businesses account for about 43 percent of U.S. GDP. The country has about 36 million small businesses that account for 99.9 percent of all U.S. businesses. How much money do you think you guys have lost in terms of earnings potential because of this trade war? We've definitely taken it on the chin year over year in terms of our top-line revenue. We will still be up year over year, but that is more of a function of newness coming in and replacing some of the older items that we can no longer manufacture because of the higher tariffs. The tariff on actual fresh turmeric, if it's in the 20 to 30 percent range, the impact on my costs could be quite substantial. Anjali Bhargava started Anjali's Cup in 2014 with about a quarter of a million dollars in annual sales. She says tariffs are threatening her livelihood. How much inventory are you carrying now versus what you did before the global trade war? I have a fraction of the inventory. Usually right now, going into the holiday season, I'd have seven or eight pallets at least. What's not here? I guess turmeric to the tins. A big problem for Bhargava. Many of her ingredients come from abroad. My tea, the best tea for masala chai comes from India. My ginger and my cinnamon are coming from Vietnam. And then my tin packaging has been coming from China. All of the countries that you have listed have now a tariff assigned to them. I believe on my last batch of tins, I did pay like a 20, 25 percent tariff. Finding many of those ingredients domestically is not an option. We just don't have the climate. We're not growing Assam tea in the U.S. It's not going to happen. Coffee tariffs leading to the higher prices at coffee shops are another big headwind facing Bhargava's tea sales. I wouldn't be surprised if rather than gaining accounts, I end up losing accounts because they just can't afford to pay for having a really high quality product like this, even though it's something that people really go out of their way to get. In addition to tariffs, Bhargava says the current economic climate is adding additional pressure on small businesses like hers. It's been really frustrating because I don't have the resources to stockpile and I'm also facing lower sales this year than I anticipated because people are pulling back on their spending. Between 1995 to 2021, small businesses created 17.3 million net new jobs in the U.S., accounting for 62 percent of net jobs created. I just lost another co-packer. I don't actually know how I'm going to produce the product that I have the ingredients for right now. Despite those issues, Bhargava remains somewhat optimistic she will be able to navigate the current tariff environment. I'm going to have to look at how much I can actually absorb of the cost increases on my ingredients. And if I can't, then I'm going to have to discontinue the products I'm currently making and look to see if I can make products that are cheaper to produce or I'm going to have to slowly close up. While small businesses have been reeling from the impact of tariffs, many larger retailers are thriving. Net sales at Amazon increased 13 percent to $180 billion in the third quarter of 2025 compared to a year earlier. Apple posted quarterly revenue of $102 billion for the quarter ending September 27, 2025, up eight percent from a year earlier. One of the largest challenges for small and medium-sized businesses is the economies of scale. They can't compete with the Walmarts of the world. They just don't have the money and they don't have the orders in order to mitigate the tariffs as the big guys do. Large retailers like Walmart, Target and Costco have negotiating power with their suppliers and the ability to stockpile their inventory. And some people have also said that large businesses maybe even have more political negotiation power. They can try to carve out various exemptions for their own benefit. Urban Outfitters, Gap and Nike, for example, used a portfolio approach to pricing, holding some prices where shoppers are more sensitive and increasing prices on products where consumers are willing to pay more for them. Now for the portion of tariff costs that can't be Retailers are basically making a choice. Pass along that tariff in the form of higher prices or eat it to grow or maintain share, but at the expense of profitability. So there are costs that small businesses face that a lot of times people forget about. It's not just the direct cost of their own imports. It's how other countries are now retaliating against the United States. In particular, China, Canada and even some Latin American countries have really kind of focused on small business exports in the United States, especially in the area of farming, whether it be chicken and wheat and corn and soybean exports, as well as even some manufacturing in the United States. I think everyone is also just very anxious right now. We're waiting for the other shoe to drop. We don't know what is coming around the next corner. I think the biggest question right now for business owners is how is the customer going to show up this holiday? We don't know. We can only hope and plan for the best.