Americans woke up Thursday to a new reality: The cost of doing business across nearly every industry could rise considerably as a result of “reciprocal tariffs” unveiled by President Donald Trump on Wednesday afternoon.
A vast selection of items — from cars to shoes, coffee to chocolate — could become more expensive soon, as American companies and consumers reckon with the probability of increased costs for goods imported into the U.S.
And many business owners, particularly those who run small- or medium-sized businesses, are weighing the dilemma of possibly driving customers away by raising prices or damaging their bottom line by bearing those extra costs themselves. For some entrepreneurs, emotions range from bewilderment to sadness and anger, with an uncertainty of how to proceed.
Absorbing higher costs from tariffs without passing them onto customers will be “really hard,” says Krista LeRay, owner of Norwalk, Connecticut-based needlepoint canvas business Penny Linn Designs.
LeRay’s company brought in $4.43 million in sales of canvases, threads and accessories in 2024, achieving a 36% profit margin that she says she fears will soon shrink. Penny Linn Designs does business with manufacturers in China, where total U.S. tariffs will jump to 54%, and buys needles, thread and other crafting tools from wholesalers who also source products from overseas.
“I feel wrong raising prices when I work so hard to keep them down [or] lower,” LeRay says, adding: “It feels like I should take on the burden as ‘the cost of doing business,’ but some items, I just simply don’t have the margins to do that for. I’m also afraid that for wholesale companies we buy from, they’ll raise prices to cover these extra fees, but the prices will never go back down after the tariffs are removed.”
LeRay says she’s “angry and upset with Trump” over the tariffs, which she believes will “hurt businesses, especially small businesses.” Customers are already facing inflated prices at the grocery store, and if they aren’t willing to spend more money on her goods, her business might not survive, she worries.
“These [tariffs] can’t stay forever,” she says. “There’s no way. Everyone is affected, it’s not just me.”
A baseline 10% tariff for all countries is set to take effect on April 5. A series of larger, “individualized” tariffs will go into effect on April 9, the White House announced.
As with many of the administration’s tariff announcements over the past few months, the details could soon change: Trump is open to negotiating those tariff rates with other countries, he said Thursday.
Raising prices vs. bearing the cost
When Jenny Lei launched New York-based luxury handbag company Freja in 2020, she was adamant that it would manufacture everything at a facility that specializes in vegan leather in China, where her parents were born.
“I wanted Freja to kind of be my way of showing the world this is what ‘Made in China’ can look like,” she told CNBC Make It in November. In the previous 12 months, her business brought in $9 million in revenue, including $2 million in profit.
Freja’s strong margins will allow it to “absorb the tariff for a bit while we wait to see how it impacts us,” but it’ll eventually have to raise prices, Lei now says.
“We are launching lots of new, more premium items, as well as an elevated packaging experience, within the next few months — and [we’ll] tie our price increase to that, so it feels more palatable for the consumer,” says Lei, describing a series of new prints and leather finishes. “Increasing prices, but also increasing the value they are receiving.”
Businesses that don’t raise prices face a different challenge: cutting internal costs as much as possible and running on tighter budgets for the foreseeable future. “We’ve been making contingency plans since the election, but the extent and breadth of the tariffs have taken us by surprise,” says Burlap & Barrel co-founder Ori Zohar.
Burlap & Barrel is a New York-based company that brought in $9 million in revenue last year selling high-end spices sourced from small-scale farmers around the world, according to Zohar and co-founder Ethan Frisch.
They say their costs will likely increase from tariffs on countries like Vietnam — where they source spices like cinnamon, garlic and ginger — and India, where they buy turmeric, chili powder, curry leaf and more. Trump’s announcement included a 46% tariff rate on Vietnam, and a 26% rate on India.
Burlap & Barrel doesn’t plan on renegotiating with farmers or raising prices for customers, says Frisch. Instead, it instituted a hiring freeze and paused the release of multiple new products in anticipation of the tariffs, notes Zohar.
The company no longer projects annual revenue growth in 2025, or as long as the tariffs are in effect, says Frisch. The policies “will arbitrarily drive up our costs and slow down our sales and innovation,” he adds.
‘Uncertainty has a real cost’
Even companies that source their goods from countries not on Wednesday’s list may face uncertainties.
Lauren Schulte Wang, co-founder and CEO of Venice, California-based period health startup The Flex Company, says she’s “feeling both relieved and uneasy.” Her company manufactures most of its products in Canada, and qualifies for an exemption from previous tariffs imposed by the Trump administration on the North American country.
But last month, before the exemption was implemented, The Flex Company paid “a large bill” to get its products across the border, Wang says. This week, she canceled shipments despite needing inventory “badly,” in case the reciprocal tariffs raised import prices again. Ultimately, Canada didn’t appear on Trump’s new list of levies.
“That uncertainty has a real cost,” says Wang.
With Trump open to negotiating rates before the new tariffs go into effect, some unpredictability remains. Successful businesses will need to find a way to adapt to the challenge, Freja founder Lei notes.
“At the end of the day, it is what it is … Business means being flexible, adapting to conditions both good and bad, and learning how to thrive regardless,” says Lei.
— CNBC Make It’s Cameron Albert-Deitch and Megan Sauer contributed reporting.
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