Tariffs imposed last year drove small-business owners to take on new debt, tap into retirement savings and raise prices, among other measures, according to a national survey released this week.
Many businesses experienced challenges beyond the cost of tariffs, said national grassroots group We Pay the Tariffs in a survey of 241 businesses in 40 states, including six in Illinois.
In Chicago, yarn store Dropped Stitch, incense maker Genieco and furniture seller Moderne Living participated in the survey.
Sporting goods maker Boombah based in Yorkville, west of Chicago, delayed expansion and new product development and froze hiring.
“Tariffs must often be paid up front, creating a significant cash flow burden,” Moderne Living Chief Operating Officer Rae Muranski said in the report. “This ties up working capital long before customer payments are received, making it especially difficult for small businesses to fund operations, invest in growth and remain competitive.”
We Pay the Tariffs released its report days after President Donald Trump on Monday threatened 50% tariffs on most Canadian goods starting in August. The move could unleash a new wave of economic chaos, with risks of higher inflation and further fraying of relations between the two nations.
The U.S. announced Thursday it will impose taxes of 10% to 12.5% on imports from 60 countries accounting for 99% of U.S. imports, charging that they have inadequately enforced bans on goods produced by forced labor.
New tariffs “will only deepen the debt, extend the uncertainty and push more of these businesses toward the edge,” Dan Anthony, executive director of We Pay the Tariffs, said in a news release.
Its survey found that 45% of respondents took on new debt, and 40% tapped personal savings, such as retirement funds, in response to tariffs.
When asked how their business had fared over the last year, 57% of respondents said it had declined, and four in five of them named tariffs as a major factor.
Nearly 30% of businesses laid off workers, and 56% delayed or canceled planned investments and new product development as a result of tariffs.
To absorb added costs, 83% of respondents raised prices, and 85% saw reduced profit margins.
The U.S. Supreme Court in February ruled that some tariffs imposed by Trump last year were unconstitutional. In March, the U.S. Court of International Trade determined that companies subjected to tariffs under the International Emergency Economic Powers Act were entitled to refunds.
We Pay the Tariffs’ survey was open April 24 to July 15; most businesses responded in April and May. Some had applied for tariff refunds, and others were still navigating a process that requires extensive documentation.
“For many, the claims process created additional hurdles, and even successful applicants incurred new administrative costs on top of the tariffs they had already paid,” said the We Pay the Tariffs report.
Many businesses would use tariff refunds as a lifeline, with 27% of survey respondents planning to use them to avoid closing, and 53% expecting to pay off debt.
“We’ve accumulated massive debt due to the tariffs, so if refunded, it would go to pay down that debt to help us remain in business,” said Kelly Weinberger, founder of jewelry company WorldFinds in Westmont, west of Chicago, in the report.
In May, Marla Showfer, owner of gift business the Winding Road in west suburban St. Charles, applied for tariff refunds totaling more than $18,000. So far, she has received one refund of nearly $3,700 and is waiting for the others. Meanwhile, the Winding Road is still paying 19% tariffs on handbags and goods from Indonesia.
Hannah Wilson, owner of the Dropped Stitch, 1524 W. Bryn Mawr Ave. in Edgewater, had paid nearly $1,500 in duties and fees in the last year by the end of April.
“I haven’t tallied extra expenses in terms of my vendors raising their wholesale prices for items that they themselves imported, but I’d estimate it’s at least that much again,” Wilson said in an email. “I know it’s peanuts compared to the millions of dollars other companies are spending, but it’s significant in terms of my little 600-square-foot shop.”
Contributing: AP