President Donald Trump listens during a Cabinet meeting at the White House on April 30, 2025 in Washington, DC. Andrew Harnik | Getty ImagesViresh Varma can’t sleep. The CEO of AV Universal Corp., a small footwear company that sells through retailers like Macy’s, Nordstrom and DSW, said he needed to take out a $250,000 loan to pay his tariff bill on a container of shoes he imported from India for the holiday shopping season. Varma didn’t have the cash on hand to pay the duties, which he said used to be around $7,500 for a similar-sized container before President Donald Trump’s new tariffs. But without the financing, he wouldn’t have anything to sell during the holidays.So the 64-year-old said he was faced with a choice: take on the line of credit— which came with onerous terms like weekly payments and a 32% interest rate — and raise prices to pay it back, or close the business he’s spent the last nine years building. He decided to take out the loan.”Everybody believes that I’m a fighter, so I’m fighting it,” Varma told CNBC in an interview. “We’ve reduced some salaries. We had planned to hire some people we’re not going to hire anymore. … If things don’t look good, especially after increasing the prices, and we don’t get the sales, then obviously we may lay off some people, as well.” AV Universal is just one of the many small businesses that are buckling under Trump’s global trade war, struggling to pay the sudden increase in duties and forecast what’s ahead as policy evolves. Businesses of all sizes have raised prices and negotiated with vendors to weather the tariff storm and many larger retailers have so far proven resilient, with minimal impact to their profitability and future growth outlooks. Better-than-expected quarterly reports have led investors to largely shrug off the tariff threat, as the S&P 500 hovers near record highs.But the higher costs have hit smaller companies harder because they have fewer levers to pull than their larger competitors. Their margins are slimmer, their supply chains less diverse and their negotiating power with vendors dampened by the smaller sizes of their orders.Small businesses owners interviewed by CNBC said they largely expect to be able to manage higher costs from tariffs by raising prices, but only if it doesn’t cause shoppers to buy less — which most are already starting to see.Often called the backbone of the U.S. economy, small businesses routinely represent more than 40% of the nation’s GDP and employ nearly half of the American workforce, according to the U.S. Chamber of Commerce. Trump says his tariffs allow the U.S. to reduce its trade deficits with other nations and encourage domestic manufacturing, but some of the small business owners who spoke to CNBC said that’s happening partially at their expense.The struggles they’re facing could be a warning sign for the rest of the economy and bigger businesses in 2026, said Kent Smetters, a prof …
