Small business owners across the U.S. find themselves caught in a tight spot these days. Higher tariffs on imports, climbing health insurance premiums, and spiking energy bills add up quickly for operations that run on thin margins. Owners talk about an affordability squeeze that makes everyday decisions feel like high stakes gambles.
Consider manufacturing shops first. These companies often rely on imported parts or materials, and recent tariff hikes have jacked up their input costs. Shirley Modlin runs 3D Design and Manufacturing in Powhatan, Virginia, a firm that crafts metal components for automotive, pharmaceutical, and beverage sectors. She employs about 10 people and has watched her expenses climb amid unpredictable tariff rates.
“It’s the end of the year and my employees are expecting some kind of raise, but I don’t know how much I can give them because I don’t know what kind of impact the tariffs are going to continue to have on me,” Modlin told CBS News. She faces a choice between bumping up a $350 monthly health stipend or offering wage increases, but both strain her budget.
Tariffs form one key piece of the puzzle. U.S. importers now deal with an average effective rate of 16.8%, the highest since the 1930s, according to Yale Budget Lab data. Small business importers shelled out roughly $25,000 more per month on average from April to September 2025 compared to the prior year, per a Center for American Progress analysis. Across the country, small firms paid $46.6 billion in such tariffs between March and September alone.
Julie Robbins, CEO of Earthquaker Devices in Akron, Ohio, saw her 35-person guitar pedal maker absorb an extra $60,000 in tariffs this year, with projections hitting at least $180,000 next year. “You can’t calculate how demand will suffer from a price rise, so we try to avoid that whenever possible,” she noted during a Senate small business event.
Health insurance piles on more pressure. Premiums for single coverage at firms with fewer than 50 employees have risen 120% over the past 20 years, says the National Federation of Independent Business. Enhanced tax credits under the Affordable Care Act face expiration at the end of 2025, which could hike costs by an average $1,500 for 4.4 million small business owners and self-employed folks, another CAP study warns.
Bryan Pate, CEO of PT Motion Works in San Diego, which builds exercise equipment, calls the increases “astounding” and a barrier to hiring compared to bigger rivals. Modlin shares that concern. Job candidates have walked away citing better insurance elsewhere, she said.
Energy costs complete the trio of burdens. Republican cuts to clean energy programs have pushed electricity prices higher for small operations, as highlighted in a Senate small business committee press event. Owners like Doug Scheffel of ETM Manufacturing in Massachusetts cut 25% of his staff earlier this year amid tariff volatility that tanked demand for machine parts.
“Everyone is tightening their belts and conserving cash. It has never been this severe,” Scheffel shared with CNN. About 34% of small businesses raised prices in November, a sharp uptick, as they pass on tariff and inflation hits, Bank of America analysts reported.
These pressures unfold against a larger economic picture. Small businesses make up nearly half the U.S. workforce and drive much job growth, yet 25% of households live paycheck to paycheck, spending over 95% of income on basics like housing and food. Optimism indexes from the NFIB show swings, peaking post-inauguration then dipping on tariff fears before stabilizing slightly above 52-year averages.
The Small Business Administration approved record $44.8 billion in guaranteed loans for fiscal year 2025 ending September. Owners adapt in practical ways. Some hunt for domestic suppliers or absorb hits to keep prices steady for customers. Others consider passing costs along, even if it risks lost sales.
Modlin calls it a “balancing act” that squeezes margins when prices hold steady. Robbins plans modest hikes in January, matching her suppliers’ moves. Policymakers trade blame, with Democrats targeting tariffs and ACA threats, Republicans pointing to prior inflation and regulations.
The Supreme Court may soon rule on tariff legality, though workarounds exist if struck down. Businesses press on through uncertainty. Access to affordable capital stays challenging, Goldman Sachs surveys indicate, even as 72% plan growth in 2025.
Finding talent remains difficult too, with smaller firms unable to match big company benefits or pay. These owners show resilience, adjusting operations and seeking relief, but the mix of tariffs, health care, and energy costs offers scant margin for missteps.
