While the tariff debate continues to evolve and tends to center on geopolitical leverage, trade deficits and surpluses, and supply chains, one vital segment of the American economy is consistently overlooked: small and mid-size enterprises (SMEs).
These businesses represent 45 percent of U.S. economic activity and employ nearly half of the workforce. Yet, when tariff policies shift, whether as part of a broader trade strategy or in retaliation, they disproportionately bear the brunt of the uncertainty and disruption.
The latest NFIB Small Business Optimism Index, a reliable pulse on Main Street sentiment, fell to 97.4, dipping just below its 51-year average of 98. On the surface, while that may seem modest, behind the number is a rising unease among business owners already grappling with labor shortages, inflationary pressures, and, now, growing uncertainty over tariffs and trade policy.
SMEs depend heavily on global supply chains. They source inputs, materials and components globally, not out of preference but necessity. Unlike large multinationals, these businesses lack the scale to negotiate lower prices or absorb added supply chain costs. When tariffs raise the cost of those inputs, SMEs are forced into a bind and must either pass those costs on to consumers, fueling inflation, or absorb them and risk financial instability.
The results are predictable: higher consumer prices, declining demand, and, in some cases, business closures and job losses. Tariff policy may be designed and negotiated with strategic intentions, but without careful calibration, it can act as a blunt instrument that hits our SMEs hardest.
This is more than a supply chain story. It’s a structural risk to the U.S. economy. If policymakers want to strengthen domestic industry, they must recognize that America’s economic resilience starts with its smaller firms — firms that many multinational firms depend on. That means trade and tariff policy should be shaped not just by national security priorities or lobbying but by a sober economic analysis of how tariffs affect the thousands of SMEs that power local economies.
Speaking on behalf of small businesses, Karen Kerrigan, the president and CEO of the Small Business and Entrepreneurship Council, commented: “President Trump’s agenda of less regulation and permanent tax relief and incentives for entrepreneurs and small businesses will help innovators and Main Street businesses thrive and compete in an ever-shifting economy. The president and his team understand that government actions and regulations have a disproportionate impact on small businesses — the same principle applies to tariffs. Targeted and strategic enforcement on the trade front is warranted and will help send a message to all trading partners about the importance and benefits of open markets, and that the U.S. will continue to lead on this longstanding win-win principle.”
The administration and lawmakers on both sides of the political aisle should be factoring real effect assessments for SMEs as they continue to negotiate and implement the tariff changes. Watching the tariff debate, it’s clear there is plenty of room for smart, strategic trade enforcement, and there is a need for a much higher degree of certainty as the tariff strategy evolves. Policymaking that ignores the consequences for SMEs is not just shortsighted; it’s economically unsound and dangerous.
Let’s not stifle the entrepreneurial spirit that fuels and sustains the lives and livelihoods of our hardworking SMEs and our economic security.