Only a Tiny Minority of SMBs Think Tariffs Will Have a Positive Impact on Operations

The ultimate impact of the tariff war being waged around the globe — which, depending on the day, seems like a game of one-upmanship — is yet to be known. But they’re being levied on all manner of goods and commodities, from energy to aluminum to steel to autos.

From the point of view of the small to mid-sized businesses that are the backbone of the U.S. economy, there’s little to cheer.

PYMNTS Intelligence found in the e-book “Data Book: Tariffs Drive Price Pressures as SMBs Weigh Supply Chain Overhauls,” that among the 500 small and mid-sized businesses (SMBs) surveyed, the majority — at roughly 7 in 10 — are very knowledgeable of the tariffs that are here and that are looming. Sixty-two percent of SMBs anticipate product shortages and an even greater percentage, 66%, foresee higher raw material costs as part of their supply chain picture. 

The read across, then, is that they will experience margin pressures — and a choice to make as to whether (and even if) they are able to pass on higher costs to their end customers.

Our data show that 72% of the overall sample of SMBs see higher prices in the offing, outpaced by the 78% of those business owners deemed “very knowledgeable” about the tariffs who say the same. Roughly a third of firms see that product quality will, in fact, deteriorate; even then, 74% of firms that are very knowledgeable about tariffs worry about shortages. In other words, it will be harder to produce goods, there will be fewer of them to offer end customers, and what is on offer will be of relatively poor.

And that poses the question as to whether consumers will open their wallets. The same report shows that roughly 45% of consumers see a negative impact on their personal finances from tariffs, and 35% see an equally positive/negative scenario. 

For consumers, the best case is essentially neutral — and they were already pulling back on spending before the tariffs began in earnest. Retailers would rather discontinue an affected product (14%) than raise prices (3.8%), which would winnow down consumer choice even further. 

The uncertainty is proving to be a headwind for SMBs, as our survey revealed that more than half of firms were either in the beginning stages of planning their responses to the tariffs, or had not started planning at all. 

Only a minority of SMBs, at 20% or less, depending on revenues (i.e. $1 million or less) had actually made moves to address and reconfigure their supply chains. About 18% of companies plan to replace current suppliers with domestic suppliers — but such a pivot requires some lead time. The industry most keen on supplier switch-ups has been the retail vertical, with 27.8% of SMBs in that segment.

Perhaps its small wonder, then, that 24.7% of SMBs who are billed as being “very” knowledgeable about tariffs think that the impact will be “completely negative,” and 22.8% see the trend as “mostly negative, with few positive impact.” 

Thirty-six percent see roughly positive and negative fallout in equal measure — which indicates a status quo mindset. Only 6% of the knowledgeable firms estimate that the tariffs and the trade wars will be harbingers of a “completely positive,” outcome. 

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