How Tariffs Are Crippling Small Businesses

The Salespreneur
Apr 24
3 min read

The Case of Busy Baby and the Broader Economic Fallout

In 2025, the U.S. economy is grappling with the repercussions of sweeping tariffs introduced under President Donald Trump's administration. These tariffs, particularly the 145% levy on Chinese imports, have significantly impacted small businesses, which constitute 44% of the nation's GDP and employ approximately 110 million people.

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Busy Baby: A Microcosm of the Crisis

Beth Benike, founder of Busy Baby—a Minnesota-based company specializing in silicone baby placemats—exemplifies the challenges faced by small businesses. After securing deals with major retailers like Walmart and Target, Benike encountered a sudden tariff hike that escalated from an anticipated 20–30% to a staggering 145%. This unexpected increase rendered her products financially unviable, forcing her to abandon $160,000 worth of inventory in China.

The financial strain compelled Benike to explore alternative strategies, including crowdfunding and considering international markets like Australia for repackaging and resale. Despite these efforts, the uncertainty surrounding tariff policies has left her business in a precarious position.

In this video, Beth Benike, CEO of Busy Baby, shares her firsthand experience with the challenges posed by the recent tariffs on Chinese imports. She discusses how the sudden increase in tariffs has affected her business operations, leading to difficult decisions and financial strain. Benike's story provides a poignant example of the broader impact these trade policies have on small businesses across the country.

Widespread Economic Uncertainty

The Federal Reserve's April Beige Book report underscores the pervasive uncertainty affecting the U.S. economy. Mentions of "uncertainty" and "tariffs" have surged, reflecting the apprehension among businesses and consumers. This climate has led to delayed investments, reduced consumer spending, and a slowdown in economic activity.

Economist Paul Krugman emphasizes that the unpredictability of tariff implementations, rather than the tariffs themselves, poses a significant threat to economic stability. Torsten Sløk, chief economist at Apollo Global Management, warns of a 90% likelihood of a "Voluntary Trade Reset Recession," attributing it to the disproportionate impact on small businesses lacking the financial resilience to absorb such shocks.

Challenges in Domestic Manufacturing

While the tariffs aim to bolster domestic manufacturing, small businesses like Busy Baby find transitioning production to the U.S. unfeasible. Factors such as higher costs, limited infrastructure, and reliance on imported raw materials and machinery make domestic production economically and logistically challenging.

Metric	Impact
Average Effective Tariff Rate	Increased to 22.5%, the highest since 1909 .
Consumer Price Increase	Short-term rise of 2.3%, equating to a $3,800 annual loss per household .
GDP Growth Reduction	Decrease of 0.9 percentage points in 2025 .
Apparel Price Increase	Prices rose by 17% under all tariffs .
Small Business Employment	Decline of nearly 100,000 jobs in March 2025 .
Russell 2000 Index	Entered bear market territory, dropping over 20% since post-election peak .
Busy Baby's Tariff Impact	Faced a 145% tariff, leading to $160,000 worth of inventory stranded in China .

Calls for Policy Reassessment

In response to the mounting challenges, U.S. Representative Kelly Morrison has advocated for exemptions for small businesses from the tariffs, highlighting that these enterprises are not positioned to relocate manufacturing domestically. Additionally, legal actions, such as the lawsuit filed by V.O.S. Selections, Inc. against the Trump administration, underscore the broader discontent and the perceived threat to the survival of small businesses nationwide.

The current tariff landscape presents a formidable challenge to small businesses across the United States. The case of Busy Baby illustrates the tangible consequences of abrupt policy shifts, emphasizing the need for a more predictable and supportive economic environment. As small businesses are integral to the nation's economic fabric, ensuring their resilience amid global trade dynamics is imperative for sustained economic health.