Small Businesses Slash Staff And Tap Savings In Face Of Tariffs

American small businesses are reportedly taking some extreme actions to survive tariffs on China-made goods.

As The Wall Street Journal (WSJ) reported Sunday (May 11), these measures range from business owners cashing in money market funds to companies cutting their staff by half. Many are concerned it won’t be enough.

“Nobody in power seems to care about small business,” said Scott Anderson, whose 5 Star North sells products — made in China — that range from acrylic markers to tiki torches. “At this point, the only option I see is selling out the rest of what we have and shutting our doors.”

The New Hampshire-based firm now has five employees after starting the year with 12. Three of those workers are looking for other positions and will likely leave before the month is out, Anderson said. 5 Star is also running short on stock and anticipates being completely out of products in the coming months.

As WSJ noted, smaller companies don’t have the advantages of their larger counterparts to survive the 145% tariffs on products from China. The margins are smaller, the cash cushions thinner, and in many cases, the finances of the business and its owners are interlinked.

Ronak Trivedi, co-founder of Pietra, an artificial intelligence-powered eCommerce operations platform, told WSJ he has seen a tariff-induced increase in small business closures in the last four weeks. 

“We don’t even think the worst is over,” he said. As products ordered before the policy change make it to the U.S. and are subject to the new tariffs, Trivedi said, “we are going to see a massive round of layoffs and shutdowns.”

Research by PYMNTS Intelligence has found that nearly 20% of small and medium-sized businesses (SMBs) are pessimistic about their odds of surviving the next five years.

“We need high-growth businesses to survive and thrive [in this uncertain economy],” Lucy Demery, senior vice president and head of Visa Commercial Solutions, Europe, told PYMNTS in February, noting that embedded financing options are proving to be a “huge unlock for supply chain payments.”

However, as PYMNTS wrote last month, not every SMB can adapt. Many are forgoing international sourcing altogether, turning to domestic suppliers — which brings a higher cost.

“But this tactic of reshoring is not always feasible,” PYMNTS wrote. “Many SMBs — especially those dealing in specialized goods or components — simply don’t have domestic alternatives. For others, switching suppliers means lengthy disruptions, costly compliance audits and the risk of losing product certifications.”

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