‘Chaotic’ tariff regime and trade war are leaving small businesses in their wake

By Alicia Wallace, CNN

(CNN) — Small businesses are the backbone of the US economy, homegrown companies that would seem to be exactly what President Donald Trump aims to protect as part of his “America First” trade agenda. But for many small business owners, the years of hard work and the optimistic outlooks have unraveled seemingly overnight.

The first week of April marked the culmination of two years’ work for Katharine Burke: The very first line of her self-care Purryfuls products went into production. However, the first week of April also brought massive tariffs for imported goods from China, where Burke’s products are made.

Melanie Abrantes, now 11 years in at running her eponymous handcrafted product design company, has found herself in need of ordering more artisan tools, cork and other raw materials to support the steadily growing subscription carving club. But an uncertain and frequently changing tariff environment means sudden price hikes for the unique items that come from places like Japan and Portugal.

For Busy Baby owner Beth Fynbo Benike, 2025 was stacking up to be a growth-spurt year for the business she started in 2017. The Army veteran’s baby products company got its foot in the door at Walmart and Target, and she just placed her largest-ever order to replenish inventory for her website and Amazon. That container of goods, however, now will cost her nearly $230,000 to arrive on US soil.

The erratic nature of President Donald Trump’s trade policies and the severity of newly imposed tariffs have wreaked havoc on small businesses in the US, causing costs to quickly skyrocket, unsettling longstanding supply chains, swiftly stifling growth and expansion plans — and threatening to kill American-bred businesses.

“I’m fully leveraged against this, and the first thought that came to my head is, ‘I’m going to lose my house. My boys are not going to have a place to live,’” Benike said.

These and other small businesses say they’re caught in the crossfire of escalating trade wars. And despite the trio’s efforts to manufacture their products in the US, they’ve instead had to rely on imported goods because the ability to source and produce domestically is not feasible and, in many cases, nonexistent.

“I tried for American manufacturing because I thought it would be easier on me to work with somebody local, but it didn’t exist — it hasn’t for decades,” said Burke, who ultimately turned to a China-based manufacturer to help design, test and manufacture her purring cat self-care plushies for adults.

“[China is] where the investment has been for decades in terms of building plans and equipment and training a workforce. That’s where the industry is; it doesn’t change overnight, no matter how much you want it to.”

Canaries in the coal mine

Economists have warned that the sharpest escalation in the US tariff rate in more than 115 years comes with cascading negative economic consequences, including higher costs, rising inflation and gashed earnings that may lead to a pullback in spending that could cause businesses to fail, unemployment to rise and a recession to grip the US.

America’s small businesses could be the canaries in the coal mine.

They face the greatest immediate risk from the tariffs, Gus Faucher, chief economist at the PNC Financial Services Group, told CNN.

Small businesses typically have minimal wiggle room in their margins and can’t simply eat the added costs like the big guys can. Capital isn’t as easy to come by, making small businesses more vulnerable and susceptible to exogenous threats.

“If you’re Walmart, you may be able to tell your supplier to hold the line on price increases,” he said. “But if you’re a small business owner, you don’t have that leverage.”

If small businesses start buckling, it could create a “significant economic drag,” Faucher warned.

That’s because small businesses with fewer than 50 workers employ nearly half of the American labor force and serve as critical drivers of employment economic growth.

“These small businesses are going to cut back on their investments and that can create a significant economic drag and add to the downdraft that the tariffs are already creating,” he said. “It means that economic growth is going to be weaker. It means that the unemployment rate will be higher, inflation will be higher. Consumers will be less well off than they would have been before the tariffs.”

Headwinds for a brand new business

Burke has spent the past two years building her business and creating Purryfuls, a purring plushie that’s intended to help stressed-out Millennials and Gen Zers.

The business itself was born out of a stressful situation: Burke, working in the high-pressure tech industry, found herself on the brink of burnout and in need of calm. She turned to her cat, Wren, for comfort, but the 4-year-old Siamese tabby’s emotional support is not on demand.

So she decided to create a self-care product instead (basing the design on Wren) and last month launched Purryfuls at the New York Toy Fair. After landing some acclaim and a slew of pre-orders, Burke pulled the trigger on the production.

The first line of Purryfuls was being crafted the same week that Trump’s massive “Liberation Day” tariffs were implemented — and duties on Chinese imports quickly skyrocketed to 145%.

“It went from 0% to 20%, and I think the next one was 80% and then 125% and now, 145%,” she said. “As I’m watching the news, I’m also seeing tariffs spring up and then get paused or put aside and then they come back. It’s not possible, really, for a business to adjust that quickly, particularly a small business like me.”

Burke said she’s worried that the tariffs could shut down her business before it even gets going. However, she said, while Purryfuls might be the “smallest of small businesses, I have no intention of going down without a fight.”

Burke said she has no option but to move full steam ahead and hope for the best — even though she doesn’t yet know how much more she’ll have to shell out when her 1,000 Purryfuls units land at the Port of Los Angeles.

“I’m not ready to give up on something I’ve been working two years on when, who knows, it could change in a couple of hours or a couple of days,” she said. “I’m hoping it changes in a couple of weeks, because that’s when [the Purryfuls] come in.”

‘So chaotic. It changes every day’

When Trump announced a 90-day pause on the steep and varying “reciprocal” tariffs for dozens of US trading partners (while keeping in place a 10% across-the-board tariff), that gave a slight reprieve for Abrantes, an Oakland, California-based designer who imports carving tools from Japanese artisans and raw materials from countries like Portugal, where cork is plentiful.

“I’m half-Portuguese, so I wanted to have a direct connection to my own heritage and my own experience and use a material that said a lot about my own story,” she said.

However, the materials that helped set Melanie Abrantes Designs apart from other firms could soon come at an even bigger premium.

“I’ve been trying to expedite as many orders as possible to get them through within that 90-day window,” she said. “Still, there’s definitely a lingering sense of uncertainty.”

And costs are already starting to rise for the business, she said, noting that her US-based packaging supplier sources some materials from China and has had to raise prices.

Abrantes has yet to do so herself, although she recently posted a warning on Instagram that she’d have to pass along any costs from the larger tariffs.

“It’s been so chaotic; it changes every day, and it feels like I can’t really keep up with it,” she told CNN. “So it’s been tough to be able to plan for this.”

“I want to invest in my business and in my future, but it feels so unknown, and it’s hard to make decisions on what to do if you’re not sure what’s going to happen.”

‘We don’t feel supported as a small business’

Everything seemed to be falling into place for Busy Baby, a company that specializes in products that keep babies’ items from falling on the floor.

In the fall of 2024, the Oronoco, Minnesota-based company inked deals with Target and Walmart to sell tethered baby place mats and other accessories at 250 stores across the US.

And as those sales gained traction, and to help supplement what Busy Baby sells on its own website and on those such as Amazon, Benike ordered a containerful of product from her longtime manufacturer in China.

However, as of Friday, that $158,000 order (which has been already paid for) is sitting in her manufacturer’s warehouse 7,500 miles away.

That’s because if it were to get shipped to the US, Busy Baby would have to pay an additional $229,100 to cover the 145% tariff expense. Benike launched a crowdfunding campaign to help her try to cover the cost.

The concerns extend well beyond the near term, she said. The Walmart and Target contracts were signed when tariffs were 0% and the terms include locked-in pricing.

Also, the container in waiting is for summer inventory. The next Busy Baby order would be for the critical holiday season.

“I’m afraid to start my production for [the fourth quarter], which is what we would normally be doing right now,” she said. “About 40% of our annual sales come during [the fourth quarter], and in order to fufill those orders, we need to start production now.”

But the situation is far too untenable to make that determination, she said, adding that she’s exploring all options including shifting her sales to countries outside of the US.

She’s also reaching out to members of Congress to share the plight of her business and other small operations, which she feels have been cast aside, especially as exemptions were made for smartphone, electronics and computers — products critical to the bottom line of Big Tech firms, including those not founded in America.

“We don’t feel supported as small businesses by our government,” she said. “But for me, an Army veteran, a small American business, I’m at risk of going out of business completely because the tariffs are so high that I can’t possibly afford to bring my products into the country to sell them.”

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