- Recognize how tariff costs show up indirectly in vendor pricing.
- Decide when to raise prices, negotiate, or absorb margin hits.
- Set contract terms that reduce surprise cost increases from suppliers.
Think of it this way. Your supplier’s landlord just raised the rent on their warehouse. You never signed anything. You never got a notice. But your next invoice went up, and nobody explained why.
That’s how tariffs work for most small businesses. You don’t get a bill labeled “tariff.” You get a vendor quote that’s 8% higher than last quarter. You get a parts order that costs more than you budgeted. The new import tariffs that took effect earlier this year added 10 to 15% on most imported goods. But those costs don’t show up on your books as “tariff expense.” They show up as higher prices from the people you already buy from.
A Federal Reserve survey found that 42% of U.S. small businesses reported rising costs from tariffs over the past year. Of those, 60% absorbed the hit internally. They didn’t raise prices. They didn’t switch suppliers. They just made less money.
You may not import a single thing directly. But if your vendor does, the cost is already in your invoices. This piece walks you through how to find that exposure, decide what to do about it, and protect your contracts before the next price hike lands.
Which Businesses Are Bleeding the Most
The Fed survey broke down which sectors got squeezed hardest, as the chart below shows. The numbers aren’t close:
- Retail firms reported tariff-driven cost increases at a 69% rate
- Manufacturing hit 62%
- Leisure and hospitality came in at 61%
- Healthcare and education reported 56%
Auto repair shops got a specific gut punch. A 25% tariff on imported auto parts went into effect in April 2025, and it raised the cost of nearly every non-domestic brake pad, filter, and alternator these shops stock. Small ecommerce sellers sourcing products from China faced similar squeezes as larger companies scrambled for the same alternative suppliers.
The businesses you might not expect also felt it. Agencies buying laptops and monitors. Coffee shops with imported espresso machines. Trucking operators paying more for replacement parts on rigs built with foreign components. A recent Fed survey of 6,500 small businesses confirmed that cost pain from tariffs and inflation is hitting firms well outside the obvious import-heavy sectors.
Coastal states and very small firms (1 to 19 employees) got hit harder than average, partly because they tend to rely on imported goods more and have less room to negotiate with suppliers.
If you buy anything that crosses a border before it reaches you, whether that’s parts, packaging, equipment, or coffee beans, you’re in this.
Find Your Tariff Exposure in One Hour
Quick-scan checklist:
- Pull 90 days of vendor invoices and flag price increases over 5%
- Ask each flagged vendor whether their inputs come from outside the U.S.
- Rank flagged items by total spend and focus on the top three
- Check your outgoing quotes or contracts for a price-adjustment clause
This is not a consulting project. It’s an hour at your desk with your accounting software open. Here’s how each step works.
Start with the last 90 days of vendor invoices. Sort by line item and look for anything that jumped more than 5% compared to the prior period. You’re not trying to find every tariff-affected cost. You’re trying to find the ones big enough to matter. Most businesses have 3 to 7 vendors that account for the bulk of their spending. Focus there.
For each flagged vendor, ask one question: does any part of what you sell me come from outside the United States? You don’t need to know the specific country or the tariff rate yet. You just need a yes or a no. If you can’t tell from the invoice, pick up the phone and ask. Your vendor knows. And their answer, or their hesitation, tells you a lot about how exposed they are.
Now rank those flagged items by total dollar spend over the last 90 days. Your top three are the ones worth acting on first. Everything else can wait.
The step most owners skip: check your own outgoing customer quotes, proposals, or contracts. Do any of them include a clause that lets you adjust prices if your input costs change because of government action? If the answer is no, you’ve been absorbing tariff costs with no way to pass them forward. That’s the gap this audit is designed to reveal.
A reality check before you start thinking about switching vendors. According to the Fed survey, only 13% of small businesses managed to move to domestic suppliers. Switching takes months, requires new quality checks, and often costs more upfront. This audit isn’t about flipping your supply chain overnight. It’s about knowing exactly where the risk sits so you can make better decisions this quarter.
- If you want to go deeper, look up the HTS code for your most exposed products. An HTS code is the government classification number that determines which tariff rate applies to a specific imported product. Your vendor or a customs broker can give you the code, and you can search it on the U.S. International Trade Commission’s free database.
Raise Prices, Split the Cost, or Bleed Quietly
Once you know where your costs shifted, you have three real options. None of them are painless.
Raise your prices
A repair shop facing higher imported parts costs might add $10 to $20 per job to cover the gap. It works if your customers are loyal and your competition is in the same boat. But consumer confidence is shaky right now, and price-sensitive buyers will notice. If you raise prices, be ready to explain why. Customers respect honesty about cost increases more than they respect a quiet price bump they discover later.
Go back to your vendors and split the cost
This is the option most small business owners haven’t tried, and it’s often the best first move. You’re not asking your vendor to eat the whole tariff. You’re asking them to share it, or to shorten the commitment period so you’re not locked into inflated pricing for a full year. For example, imagine an agency that buys equipment for client projects. Instead of absorbing the higher cost or marking up every proposal, they go to the vendor and negotiate a 90-day price hold with a cost-share clause. If the tariff drops, both sides benefit. If it stays, neither side takes the full hit. This works because vendors want to keep your business. They know you have options, even if switching takes time. The conversation itself shifts the dynamic. You’re not a passive buyer anymore. You’re a partner managing a shared problem. If you’re weighing tradeoffs like this alongside hiring and expansion decisions, this breakdown of the hard decisions facing small businesses in 2026 is worth reading.
Absorb it and hope for reversal
This is what 60% of affected small businesses did. It’s the default, and it’s expensive. A retailer eating the margin on imported inventory might survive one quarter. Two quarters of it starts draining the cash you’d use to hire, buy equipment, or run a marketing push.
If a tariff-driven cost increase exceeds 2% of your total COGS (the total cost of the goods you sell or the materials you use to deliver your service), absorbing it quietly for more than one quarter will do real damage to your business.
Two Clauses That Stop the Next Surprise
For every quote, proposal, or estimate you send to customers, add a tariff-adjustment clause. This is a simple sentence that says you reserve the right to pass through government-imposed cost increases with 15 days’ written notice. It doesn’t mean you will raise prices. It means you can, without renegotiating the entire deal. Most customers will accept this. The ones who push back are the ones you want to have that conversation with now, not after your costs jump.
For your supplier agreements, push for 90-day price locks instead of annual ones. And require that any tariff-driven increase come with documentation: the specific government notice or the product classification code that triggered it. If a vendor refuses to lock their prices for even 90 days, that refusal is a signal. It tells you they expect their own costs to keep shifting, which means your costs will too. That’s useful information even if you don’t win the negotiation.
The Court Gave You a Window, Not a Fix
Here’s the short version of what happened:
- Tariffs on most imported goods took effect in 2025 and were raised multiple times
- Small businesses absorbed billions in higher costs over the following months
- In early 2026, the Supreme Court struck down most of these tariffs as unconstitutional
- The administration responded by imposing provisional tariffs (temporary tariffs it can keep in place while it decides next steps, even after the court ruling)
Business groups celebrated the ruling. The National Retail Federation said refunds from overpaid tariffs “would provide an economic boost, enabling companies to reinvest in their operations, employees, and customers.” That’s real money. But don’t plan your quarter around receiving it. The provisional tariffs could be extended, and the political situation is far from settled. Plan as if some tariffs stick around at reduced levels.
So should you stock up on tariff-exposed inputs now, or wait?
Pre-buying makes sense only when three conditions are true:
- You will use the item within 120 days
- Storage costs are under 3% of the item’s value
- You have the cash on hand without borrowing
If any of those fail, wait. A repair shop stocking 8 weeks’ worth of brake pads it knows it will use? That’s a reasonable pre-buy. A retailer warehousing three months of seasonal inventory it might not sell? That’s a cash trap. Less than half of small businesses were profitable before the tariff hikes hit. Tying up cash in inventory you might not move fast enough is a risk most owners can’t afford.
88% of Owners Are Still Confident. Here’s What the Smart Ones Did First.
Despite everything, 88% of tariff-affected small business owners say they’re confident about the next 12 months.
That number comes from a Revenued survey reported by Nav, and it’s not delusion. Most owners are adapting. Some are cutting costs. Some are testing new tools and automation to offset the margin pressure. But there’s a difference between blind optimism and informed optimism. Blind optimism is hoping tariffs disappear and your vendor quotes go back to normal. Informed optimism is knowing which five vendors drive your biggest costs, having a price-adjustment clause in your contracts, and checking your exposure before the next quarterly review.
This week, pull your top five vendor invoices from the last 90 days and look for increases you can’t explain. That one hour of work is the difference between reacting to the next surprise and seeing it coming.
