Amid a backdrop of economic challenges, small businesses face mounting pressures from global conflicts and domestic policies.
“It just feels like things keep getting piled on top,” said Nichole MacDonald, who operates a women’s bag company in San Diego. “Not just for businesses, but for consumers. And what is a business without consumers?”
MacDonald noted that as consumers tighten their budgets, spending on luxury items decreases. Her customers are opting for more affordable denim bags instead of leather ones.
“Each level of pressure, economic uncertainty and tightening of the purse strings impacts people’s decisions on spending,” the Sash Bag owner said.
Other local businesses echo these sentiments, dealing with increased costs and the lingering effects of tariff policies even after the Supreme Court ruling that overturned many of President Donald Trump’s tariffs. Some businesses may qualify for tariff refunds, but the process remains uncertain. New tariffs have been introduced under different legislation, prompting legal challenges from California and other states.
Additionally, rising fuel costs have increased shipping expenses across the board. In California, regular unleaded gas averages $5.55, up from $4.79 a year earlier, according to AAA. Nationally, the jump is from $3.15 to $4.11. This surge has contributed to inflation, while consumer sentiment suffers.
Small businesses, defined as those with fewer than 500 employees, bear the brunt of these challenges more than larger corporations. Their survival is crucial, as they account for 99% of net new jobs in the state, according to the California Office of the Small Business Advocate.
Business Struggles and Adjustments
MacDonald’s business, which generates six figures monthly, saw a significant decline in 2025 sales—up to 50% compared to the previous year. Tariffs forced her to move production from China to India, reducing her staff from 11 to three. High tariff expenses also limited her holiday inventory.
As she awaits updates from import brokers regarding potential tariff refunds, MacDonald reflects on the lost opportunity costs: “That money could’ve gone to personnel or to growth, instead of going to a tax.”
Global factors have amplified these issues. MacDonald’s Indian manufacturing partner recently informed her of a 25% hike in raw material costs, necessitating another price increase after a 10% rise last year due to tight margins.
Noel Hacegaba, CEO of the Port of Long Beach, highlighted the shift of rising costs from shippers to small businesses and consumers, attributing new surcharges and higher rates as contributing factors. Major carriers like Amazon, the U.S. Postal Service, UPS, and FedEx have all adjusted surcharges to cope with increased fuel costs.
Jonathan Gold from the National Retail Federation noted that small retailers are less capable of absorbing cost increases, leading to these expenses being passed on to consumers.
Managing Consumer Expectations
Rema Abedkader, a designer of women’s clothing, feels the impact of rising shipping costs but hesitates to increase prices. “We can only charge so much, so we’re having to eat that cost again,” she said.
Abedkader’s REMA clothing brand has reduced production by 50% this year, affecting local partners like sewers and pattern makers.
“When I’m not producing, there’s no work for my sewer, pattern maker and cutter,” she explained, leading to a cycle of reduced work availability and additional job requirements for her manufacturer.
Abedkader is intensifying efforts to innovate in marketing and expand local wholesale to cushion the financial blow.
Similarly, Jennafer Grace Carter, another apparel designer, has seen fabric brokers in Los Angeles close due to tariff costs. Her Jennafer Grace brand faces challenges with immigration policies affecting her labor force. She adapts by limiting styles and maintaining modest price hikes to retain customers.
Long-term Economic Implications
The landscape for small businesses remains uncertain. Gene Seroka, director of the Port of Los Angeles, emphasized the difficulty in business planning amid fluctuating policies and global dynamics.
Ellie Rose, who runs Calibaja Manufacturing, sees prolonged delivery times for products from Asia as another hurdle. “That’s components, finished goods, whatever you need coming from Asia,” she said, warning that delays will inflate costs.
Even if fuel prices normalize, Rose doubts that product prices will drop, as businesses have absorbed increased costs for years, potentially stifling future innovation.
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This story was originally published by CalMatters and distributed through a partnership with The Associated Press.
