Tariffs; what are they, what they mean for your small business, and what can you do to help navigate these difficult and uncertain waters.

josefinainteriors
4 days ago
3 min read

In recent years, tariffs have become a hot topic in conversations about global trade, particularly when it comes to products imported from China. For small retail businesses in the United States, these additional costs can feel like a heavy burden. But what do tariffs actually mean for your business—and why are so many entrepreneurs still choosing to manufacture in China despite rising fees?

What Are Tariffs?

Tariffs are essentially taxes imposed by a government on imported goods. In theory, they are designed to protect domestic industries by making foreign products more expensive, encouraging businesses to source or manufacture domestically. But in practice, they often have complex ripple effects—especially on small businesses that rely on global supply chains to stay competitive.

The Small Business Squeeze

Small retail businesses typically don’t have the negotiating power or scale that large corporations do. While a massive retailer might absorb or redistribute tariff costs, a small business often has no choice but to either raise prices or reduce margins. This creates a dilemma: pass higher costs onto your customers and risk losing sales, or absorb the hit and reduce profitability.

Some of the biggest pain points for small businesses include:

Higher landed costs: Increased tariffs mean higher total costs to get products into the U.S.
Inventory risk: Higher upfront costs make it riskier to hold large volumes of inventory, especially if demand is uncertain.
Cash flow challenges: Tariffs can disrupt the careful balance of cash flow, forcing small businesses to rethink everything from pricing to purchasing timelines.

Why China Still Makes Sense for Many

Despite the increased tariffs on Chinese imports—some as high as 30% (and recently 145%) or more—many small businesses still choose to manufacture there. Why?

Established Infrastructure - China has decades of experience manufacturing everything from electronics to ceramics to packaging. The systems, suppliers, and factories are already in place, which makes the production process fast, consistent, and scalable.
Cost-Effectiveness - Even with tariffs, the total cost of manufacturing in China (including labor, materials, and logistics) is often still lower than producing in the United States. U.S. manufacturing may eliminate tariffs, but domestic labor costs, factory minimums, and lead times can offset those savings.
Access to Specialized Materials - Many raw materials, especially in industries like candle making or beauty, are more accessible and affordable in Asia. Sourcing them domestically can lead to longer timelines and significantly higher costs.
Low Minimums and High Flexibility - Chinese factories often offer lower minimum order quantities (MOQs), which is crucial for small businesses trying to test new products without overcommitting financially.

Attracting Budget-Conscious Buyers with Lower-Cost Items

As inflation and tariffs push prices higher, another way for small businesses to adapt is by offering lower-cost or smaller-sized products. This allows you to:

Reach a broader customer base: Not everyone is ready to commit to a $100+ order. Smaller, more affordable items make your brand more accessible.
Encourage trial and discovery: Sample-sized products or mini versions of bestsellers can introduce new customers to your brand at a lower risk.
Boost average order value: Pairing smaller add-ons with premium items can help increase total cart value without intimidating the customer with high single-item prices.
Create giftable options: Lower-cost items make great gifts or impulse purchases—especially effective around holidays or promotional seasons.

Some ideas include:

Travel-size or mini versions of your bestsellers
Bundles or kits at a lower price point
Accessories, tools, or complementary products under $20
Seasonal items or limited-time drops that create urgency and appeal

This strategy can also cushion the blow of tariffs by distributing cost across a wider product range and giving you room to experiment with new price tiers.

How to Navigate the Tariff Landscape

If you’re a small retailer or product-based business, here are a few tips to adapt:

Build tariff costs into your pricing strategy - Transparency and value-driven messaging can help justify slight price increases to your customers.
Diversify your suppliers - Look into options in countries like Vietnam, India, or Mexico to spread risk and potentially avoid China-specific tariffs.
Negotiate smarter with suppliers - Some Chinese suppliers are willing to share tariff costs or adjust pricing in exchange for longer contracts or larger orders.
Consider hybrid production models - Some businesses manufacture components in China and assemble or finish the product in the U.S. to reduce cost while boosting brand appeal.

The Bottom Line

Tariffs are not going away any time soon, and while they’ve added complexity to sourcing decisions, they haven’t eliminated China’s dominance in global manufacturing. For small businesses, the key is staying agile and strategic. Whether it's adapting your product line to include budget-friendly options, negotiating smarter with suppliers, or finding creative ways to manufacture, your ability to evolve will determine your success in a shifting economic landscape.