LARK Toys, a family-owned toy store located just outside of Minneapolis, Minnesota, offers a delightful experience for visitors. With its whimsical carousel ride and 12 different flavors of fudge to tempt the taste buds, the shop has long been a favorite destination for families looking for fun and joy. However, behind the charm of the toys and the sweet treats lies a far more stressful reality: the economic pressure caused by President Donald Trump’s 145% tariffs on Chinese imports, which are set to trigger price increases and product shortages in the near future.
According to Kathy Gray, the co-owner of LARK Toys, the store imports approximately four out of every five products from China. While the store had placed a flurry of orders to amass inventory before the tariffs hit, the lack of funds and storage space have limited their ability to stockpile enough goods to prepare for the potential disruption. The looming threat of the tariffs has created a tense atmosphere for small businesses like LARK Toys, which are already struggling to cope with rising costs and supply chain challenges.
“It’s threatening,” Gray said. “This administration isn’t operating with the best intentions of small businesses and regular folks.” This sentiment is echoed by many small business owners across the nation, as they face the brunt of the fallout from the trade war between the United States and China.
Small businesses are often more vulnerable to changes in trade policy than their larger counterparts. They lack the financial cushion, supply chain flexibility, and political influence that big corporations can rely on. According to the U.S. Small Business Administration, small businesses make up 99.9% of all U.S. firms and account for over two-fifths of the nation’s gross domestic product. However, despite their significant contribution to the economy, they are often left exposed when major policy shifts take place.
Ebehi Iyoha, a professor of business administration at Harvard University, who co-authored a study on small business sentiment, noted that small businesses are particularly susceptible to disruptions caused by changes in trade policy. “Many small businesses are quite vulnerable and exposed to changes in trade policy,” Iyoha said. “They typically don’t have the financial flexibility to absorb the costs of increased tariffs or to adapt to shifting supply chain dynamics.”
The Trump administration has been touting its achievements in support of small businesses, citing low inflation and job growth as key indicators of success. Kelly Loeffler, the Administrator of the Small Business Administration, issued a statement late last month praising President Trump’s pro-growth economic agenda, which she claimed had slashed inflation and driven job creation. Despite these claims, small businesses are bearing the brunt of rising costs caused by tariffs, which are putting them in an increasingly precarious position.
Tariffs, which are taxes on imported goods, have a direct impact on the prices that consumers pay for products. If businesses are unable to absorb the cost of the tariff, they often have to pass it on to the consumer by raising prices. Small businesses, however, have less capacity to absorb costs or negotiate lower prices from suppliers. This puts them at a significant disadvantage compared to larger businesses, which can exert more pressure on suppliers to reduce their prices.
The effective average tariff rate for U.S. importers has now reached 25.2%, the highest level since 1909, according to a recent study by the Yale Budget Lab. For small businesses, this means increased costs for everyday products, which can lead to price hikes that consumers may find unaffordable. Many small businesses are forced to raise prices for their customers, putting them at a disadvantage compared to larger competitors with more bargaining power.
Small businesses often operate on thin profit margins, and with limited cash reserves, they are less equipped to weather the storm caused by rising tariffs. According to a JPMorgan Chase Institute study, the average small business has enough cash reserves to last only 27 days. In contrast, larger companies can typically afford to absorb some of the costs of tariffs, allowing them to maintain competitive prices and preserve customer loyalty. Small businesses, however, often have to make tough decisions about whether to raise prices or risk losing customers.
Some businesses have received relief from the administration’s tariffs. For example, the White House recently announced an exemption from tariffs for a range of electronic devices. However, this exemption has not alleviated the broader impact of the tariffs on small businesses, many of which face significant disruptions to their supply chains. In some cases, businesses have had to pivot to new suppliers or change their product offerings in response to the tariffs, all of which involve additional costs and challenges.
For LARK Toys, the reality of the tariffs is especially dire. The shop imports a large portion of its products from China, and with the tariffs set to increase, the store is bracing for price hikes and product shortages. Despite placing orders to stock up on inventory before the tariffs take effect, the store’s limited financial resources and lack of storage space have made it difficult to secure enough stock to meet demand. The uncertainty surrounding the tariffs has left small business owners like Kathy Gray wondering how they will navigate the challenges ahead.
In addition to the financial strain caused by tariffs, the broader trade war between the U.S. and China has led to a sense of unease and instability in the business community. Small businesses are left to grapple with the unpredictability of future policy changes, which can have far-reaching consequences for their operations. As the trade war continues to escalate, small businesses like LARK Toys are forced to make difficult decisions about how to keep their doors open and remain competitive in an increasingly volatile marketplace.
The plight of small businesses is compounded by the lack of political influence that many small business owners have when it comes to lobbying for policy changes. Large corporations with deep pockets and access to powerful lobbying groups can exert significant pressure on policymakers to secure favorable outcomes. Small businesses, on the other hand, often lack the resources to advocate for their interests, leaving them at the mercy of political decisions made by those in power.
While the Trump administration has touted its commitment to supporting small businesses, the impact of tariffs and other trade policies has had a devastating effect on many entrepreneurs. As small businesses continue to face rising costs, supply chain disruptions, and price hikes, there is growing concern that many will be forced to close their doors, leaving communities without the local businesses that are the backbone of the economy.
In the face of these challenges, small businesses are calling for greater support and protection from the government. Many are advocating for policies that would provide relief from the impact of tariffs, such as subsidies, tax breaks, and access to low-interest loans. Others are calling for a more comprehensive approach to trade policy that takes into account the unique challenges faced by small businesses and ensures that they are not left behind as larger companies continue to benefit from favorable policies.
As the trade war between the U.S. and China continues to unfold, the future of small businesses remains uncertain. For LARK Toys and other small businesses across the country, the threat of rising tariffs and product shortages looms large. The only hope for these businesses lies in a change in policy that prioritizes the needs of small businesses and ensures that they can continue to thrive in a competitive marketplace.
