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Effect of Tariffs on U.S. Small Businesses

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Abstract

How has the recent implementation of tariffs affected small businesses? Due to lack of data, little is known about this issue. In this Liberty Street Economics post, we use data from the 2025 edition of the Small Business Credit Survey (SBCS) to explore this question for businesses nationally and in the Second District (defined, for the purpose of this study, as New York, New Jersey, and Connecticut). We find that the majority of national firms in the goods and retail sectors reported experiencing financial challenges due to tariffs in 2025, with even larger shares of regional firms doing so. In response, about 80 percent of national and regional firms passed on at least some of the higher costs of imported inputs to customers, while about 60 percent absorbed some of the costs, as many firms did some of both. Firms that faced greater tariff challenges in 2025 were more pessimistic about employment and revenues in 2026.

Suggested Citation

  • Will Aarons & Asani Sarkar, 2026. "Effect of Tariffs on U.S. Small Businesses," Liberty Street Economics 20260709, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:103509
    DOI: 10.59576/lse.20260709
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G0 - Financial Economics - - General

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