Most of us haven’t spent much time thinking about tariffs since learning about the Revolutionary War in grade school. Other than a hazy sense that they somehow lead to dumping tea into the Boston Harbor, these taxes probably seemed unrelated to modern life—until they became one of the current administration’s most beloved buzzwords.
But tariffs can have far-reaching economic and political consequences, which King George III learned to his detriment 250 years ago. This is even more true in our current economy, where everyone from giant corporations to solopreneurs rely on foreign goods and manufacturers to bring their products to market. And while companies on the Fortune 500 list may be able to pivot when sourcing materials from foreign countries becomes too expensive, that may be impossible for small businesses.
Here’s what you need to know about how tariffs might affect your favorite small businesses.
What’s a tariff and who pays it?
You probably remember the definition that Mrs. Turley taught you in 4th grade: a tariff is a tax placed on foreign goods and materials imported into the United States.
You might also recall why the American colonists were so dang angry about the Stamp Act, the Townshend Acts, and the Tea Act back in the 1770s: the tariffs meant higher prices for the colonists. That’s because someone has to pay the extra cost to get the goods into the importing country’s hands. In most cases, the importer or company passes the cost along to the consumer in the form of a higher price tag for the retail product.
There are some notable exceptions, such as how Harley-Davidson assumed the cost of the 25% tariff on gas motorcycle imports in the European Union in 2021. But the iconic American company took on that $2,200 cost per bike as a temporary measure while it (unsuccessfully) worked to circumvent the tariff. Considering the recent EU threat of 50% levy on Harley-Davidson imports as of April 1, 2025, it’s likely the motorcycle company will have to pursue a different strategy to keep selling bikes in Europe.
Why tariffs?
Governments impose tariffs for a number of reasons, starting with increasing government revenue. King George III imposed tariffs on the American colonies because his royal coffers were pretty bare and he figured the colonists were too far away to effectively kvetch about it.
But tariffs can also theoretically offer economic protection to domestic industries. Imposing tariffs on foreign manufacturers can help spur consumers to buy American, which can potentially boost the domestic economy.
And tariffs have long been used as a kind of political retaliation, as we’ve seen in the past several weeks. By imposing high tariffs on goods imported from other countries, the U.S. is basically threatening the economic stability of the home country.
The terrifying truth about tariffs
The current administration seems convinced that tariffs are the best way to return America to a former level of greatness. The thought process goes something like this:
Step 1. Impose tariffs on foreign raw materials and manufactured goods
Step 2. American consumers stop purchasing imported goods because they are too expensive
Step 3. “Minor” economic disruptions
Step 4. New American businesses emerge to fill the market gap
Step 5. Major foreign companies move manufacturing to the U.S.
Step 6. Economic unicorns and rainbows
Unfortunately, this is an unlikely scenario. While tariffs can potentially give American businesses some breathing room (as the trade restrictions on Japanese cars helped keep American auto manufacturers afloat in the 1980s), most economists agree that tariffs have a poor track record for spurring economic growth.
Typically, tariffs cost a lot, don’t bring significant levels of manufacturing or business to their home country, can cause supply-chain disruptions, and are less effective than other tools in the economic toolbox.
Ignoring the global economy
The goal of the current tariffs is to aid any U.S. business that keeps its manufacturing on our shores. Under these tariffs, American goods will cost less than imported goods, which will increase sales and boost business.
But our current tariffs will not just be levied on manufactured goods, but also on raw materials and parts. For example, a small business owner that does all of its manufacturing in the United States but sources its raw materials from Canada may still feel the sting of tariffs, even though they are not importing finished consumer products from another country.
Even if an American small business is able to source all of its needs domestically, imposing tariffs on other countries often ends with retaliatory tariffs on American goods, which means any business owner selling internationally will also lose business.
Surviving and thriving through tariffs
Whether you are an entrepreneur or a consumer, you will likely see economic changes as the Trump tariffs go into effect. As with any major economic force outside of your control, there are only so many strategies available to you as an individual.
Specifically, it’s prudent to keep abreast of economic news so you can alter your financial plans as circumstances change. Cutting costs that are less important to you can help free up room in your budget to deal with higher prices on necessities. You may also want to consider putting off major purchases until prices have stabilized.
And if you’re still looking for potential strategies, remember that heaving caffeinated beverages into major bodies of water has an excellent tariff-busting track record.
