Small Business Tips: How to Navigate Tariffs and Trade in 2026
This year could see the latest round of tariffs raise costs and disrupt supply chains. Learn how small business owners can plan for pricing, cash flow and trade uncertainty.
What are tariffs and how do they work?
While businesses technically pay the tariff first, the cost often moves down the line, resulting in higher prices for customers, reduced margins for businesses or a mixture of both. According to multiple economic studies, most tariffs are passed through to U.S. businesses and customers rather than absorbed by foreign exporters.
Tariffs are commonly used to protect American industry, influence international trade policy or generate additional government revenue. In practice, they tend to increase trade costs and import duties, which can affect pricing, supply chains and business planning. Even companies that don’t directly import may feel the impact if their suppliers rely on imported materials. Additionally, supply chain disruptions and tariffs usually increase the cost of moving goods, which affects almost all industries and drives prices up.
The main types of tariffs businesses should understand
Not all tariffs work the same way. In the U.S., import taxes generally fall into six major categories that, when combined, help determine the final cost of a product.
- Some tariffs apply to nearly all imports under long-standing trade rules, often referred to as Most Favored Nation (MFN) rates.
- Others are reciprocal tariffs, which set country-specific rates, usually with a minimum baseline.
- Section 232 tariffs are tied to national security and apply to products like steel, aluminum, vehicles and certain equipment, regardless of where it comes from.
- Tariffs under the International Emergency Economic Powers Act (IEEPA) are emergency-based and can apply to specific countries.
- Section 301 tariffs target goods tied to unfair trade practices, primarily from China.
- Finally, antidumping and countervailing duties are added when imports are priced unfairly or subsidized.
Because multiple tariffs can apply to the same product, the total tax rate paid by importers is often significantly higher than the rate mentioned in individual announcements.
Why tariffs matter more for small businesses than large companies
Small businesses typically operate with tighter margins and less flexibility than large corporations due to having fewer resources. When tariffs raise costs for small businesses, they tend to have fewer options to absorb the increases without adjusting prices or operations.
Large companies may have diversified suppliers, long-term contracts or overseas facilities that help spread risk. Additionally, large companies can compete on a scale which softens the impact of decreased margins. Small businesses are more likely to rely on a limited number of vendors, making them more vulnerable to sudden tariff changes, rising trade costs and unpredictable pricing.
Additionally, small businesses typically need to pass more costs onto the consumer, making it difficult to compete on cost effectiveness. According to the Center for American Progress, “74% [of small businesses] said they are worried about their business surviving over the next 12 months," further indicating tariffs’ negative effects.
How tariffs are changing in 2026
U.S. tariff policy remains active and uncertain. By late 2025, the average tariff rate on imported goods had risen well above historical norms, increasing prices across a wide range of industries. New and expanded tariffs, including reciprocal tariffs and product-specific duties, are further raising the cost of imports.
For small business owners, the challenge is not just the tariff rate itself, but the uncertainty around timing, enforcement and other potential changes. This makes proactive planning more important than waiting to react after costs increase. It’s also important that all business owners track the tariffs closely through 2026 and beyond.
Industries and costs most likely to be affected by tariffs
Tariffs don’t affect all industries equally. Businesses most exposed to tariffs are often in industries that rely on imports from different countries, most notably manufacturing, construction, retail, agriculture and transportation. Industries tied to autos, construction materials and manufacturing inputs are often affected first, since tariffs frequently apply to parts and raw materials rather than finished products.
Tariffs on major trading partners, such as tariffs on China, can raise prices for raw materials and finished goods. These higher import duties may affect inventory costs, equipment purchases and vendor pricing, even for businesses that sell locally.
How tariffs affect supply chain and pricing decisions
Supply chains disrupted by tariffs can force businesses to reconsider where they source their products, how much inventory they carry and how pricing is structured. Even modest increases in per-unit costs can compound quickly when applied across high-volume inventory or long supply chains.
Rising supply chain costs then force these pricing decisions. Some businesses absorb part of the cost or pass it on to customers. Unpredictability can make pricing strategy more complex, especially in competitive markets where price sensitivity matters, making it more difficult to accurately plan for future business outcomes.
Cash flow planning in a higher-tariff environment
When inventory or materials costs rise, businesses will usually need to secure increased working capital before revenue comes in. As businesses’ upfront costs rise, cash flow planning becomes more essential. On top of paying more for the same amount of goods, businesses may face longer gaps between paying suppliers and receiving customer payments.
Planning for these timing differences and increased costs by building cash reserves and reviewing financing options can help maintain stability when tariff-related costs pressure your business’s bottom line.
If your business is experiencing difficulties resulting from cash flow planning, cash management tools and services may help you better control cash flow and plan for regular business needs.
Using data and AI tools to stay ahead on tariffs
Keeping up with tariff news is no longer limited to tracking daily headlines. Emerging AI-enhanced trade tools and data platforms can help businesses monitor tariff changes, estimate cost impacts and model different pricing or sourcing scenarios.
Not only can these tools support better decision-making, but they can also help with trade compliance, cost forecasting and identifying potential supply chain risks before they disrupt regular operations. Rather than replacing human decision-making in supply chain management, these tools can automatically track the background data needed to support these decisions.
Practical steps small business owners can take now
Small business owners can take proactive steps like these to help reduce tariff risk:
- Review supplier locations and reliance on imported goods.
- Identify products or services most affected by small business tariffs.
- Build flexibility into pricing and contracts where possible.
- Strengthen cash flow forecasting.
- Use data tools to monitor changes and plan ahead.
Preparation helps reduce surprises and supports more confident decision-making, especially when facing uncertain times.
Why local banking relationships matter during trade uncertainty
Tariffs and trade changes affect all businesses differently. Local banking relationships can help provide guidance that is tailored to your business, industry and community. Rather than focusing only on transactions, local banks often understand regional markets and long-term business goals.
During periods of trade uncertainty, having a financial partner who can help with planning, cash flow strategies and growth decisions can make navigating tariffs more manageable.
Tariffs in 2026 FAQs
How do tariffs affect small businesses?
Tariffs raise the cost of imported goods and materials, which can reduce margins or lead to higher prices for customers, especially for small businesses with limited flexibility.
Do tariffs only affect businesses that import goods?
No. Businesses that buy from U.S. suppliers may still face higher costs if those suppliers rely on imported parts or materials.
Which industries are most affected by tariffs?
Manufacturing, construction, retail, agriculture and transportation are often most impacted due to their reliance on imported materials, equipment or components.
Will tariffs increase prices for customers in 2026?
In many cases, yes. When businesses cannot absorb higher costs, especially seen in smaller businesses, a portion of the cost is often passed on to customers through pricing increases.
How can small business owners prepare for tariff changes?
Owners can review supplier exposure, plan for higher costs, strengthen cash flow forecasting and look into data tools and AI tools designed to monitor tariff-related risks.
For Informational/Educational Purposes Only: The opinions expressed may differ from other employees and departments of Associated Bank N.A., or any bank or affiliate. Opinions and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. (1513)