Turning Tariffs into Opportunities: How Small Business Can Adapt and Thrive

For many small and medium-sized businesses (SMBs), the rising wave of tariffs and trade disputes feels like yet another unpredictable obstacle in an already complex economic landscape. Whether imposed on steel, semiconductors, or consumer goods, tariffs often raise operating costs, disrupt supply chains, and create uncertainty for businesses without the resources of multinational corporations.

But while tariffs undeniably create challenges, they can also present opportunities for small businesses. By treating tariffs as a catalyst for innovation—rather than an unavoidable burden—business owners can uncover new ways to strengthen resilience, enhance competitiveness, and diversify growth.

This article examines how tariffs are affecting small businesses and explores three insights to help mitigate risks and seize opportunities: market diversification, dynamic pricing, and nearshoring. Along the way, we’ll highlight real-world examples and practical insights that business leaders may find useful as they consider their next steps.

The potential impact of tariffs on small business

Unlike large corporations with global footprints and advisors dedicated to trade, small businesses often lack the resources to absorb sudden cost spikes from tariffs. Even a modest 5–10% increase on imported raw materials can shrink margins significantly. The ripple effects may include:

• Rising input costs: Suppliers raise prices to cover tariffs, and small businesses are often the first to feel the squeeze.
• Supply chain delays: Complex customs processes and new requirements can slow down production schedules.
• Price competitiveness pressure: Larger competitors may leverage economies of scale to soften the blow, leaving small businesses more exposed.
• Uncertainty in planning: Tariff policies can change quickly, making it difficult to forecast demand, pricing, and sourcing strategies.

While these pain points are real, they can also force SMBs to reevaluate long-standing assumptions. Instead of relying heavily on one source of supply or market, some businesses are discovering that tariff shocks can prompt for a shift toward more sustainable and resilient approaches.

Insight 1: Market Diversification

Some businesses are exploring broaden both supply and demand markets as a potential response to tariff volatility. Relying too heavily on one country—whether as a supplier or customer base— can leave small business vulnerable to sudden tariff changes.

Diversifying supply sources

Instead of importing 90% of a key input from one region, businesses can explore relationships in multiple countries. For example, a U.S. furniture manufacturer once heavily reliant on Chinese hardwood suppliers diversified by sourcing from Vietnam and Eastern Europe. While transition costs were high at first, the move help to reduce long-term exposure to tariff swings.

Considerations for small businesses:

• Map out where your top five inputs come from today.
• Identify at least two alternative supply markets for each input.
• Develop relationships—even if only partial—with those markets to create flexibility.

Expanding customer markets

Just as suppliers should be diversified, so should customers. SMBs that serve global buyers can often engage with multiple regions to create greater balance and stability. For instance, a craft brewery hit by aluminum tariffs on imported cans sought new customers in Canada and Europe, which helped offset margin pressures in the U.S.

Considerations for small businesses:

• Research trade agreements that might make certain markets more attractive (e.g., USMCA).
• Use e-commerce platforms to test demand in foreign markets before committing major resources.
• Explore partnerships with export agencies or local distributors.

Opportunity in disguise: Market diversification not only can help reduce tariff risk but also expands growth potential. SMBs that once thought global expansion was “too big” often find tariffs push them to think internationally in sustainable, scalable ways.

Insight 2: Dynamic Pricing

Tariffs frequently force businesses into uncomfortable pricing conversations with customers. Passing on the entire cost can increase risks alienating customers, while absorbing it outright can devastate margins. The solution lies in dynamic pricing models that balance transparency with agility.

Transparent communication

SMBs can strengthen trust by explaining tariff-related changes openly. For example, a small electronics distributor sent a letter to customers breaking down tariff impacts, explaining why prices had to rise by 3–5%. Customers were more understanding when the rationale was clear.

Consideration for small businesses:

• Communicate cost drivers clearly—don’t surprise customers.
• Highlight what steps you’re taking to mitigate costs (efficiency improvements, sourcing shifts).
• Use tiered pricing (e.g., discounts for bulk or long-term contracts) to reward loyalty.

Technology-enabled pricing models

Dynamic pricing software, once reserved for large retailers, is becoming more accessible for small business. These tools helps businesses to adjust pricing based on real-time cost inputs, demand shifts, and competitor moves. A mid-sized parts supplier, for instance, leveraged AI-powered pricing software to help automate quotes, ensuring tariffs didn’t erode margins.

Considerations for small businesses:

• Consider lightweight pricing tools that integrate with your e-commerce or POS systems.
• Build elasticity tests to understand how much of a cost increase your market can absorb.
• Use contracts with flexible pricing clauses tied to tariff indices.

Opportunity in disguise: By building pricing agility now, small businesses are better positioned to manage not only tariffs but also inflationary pressures, raw material shortages, and other cost shocks.

Insight 3: Nearshoring and Regionalization

Perhaps the most significant long-term opportunity tariffs create is the push toward nearshoring—moving production or supply closer to home. While offshoring has traditionally been associated with lower labor costs, evolving actors such as tariffs, shipping volatility, and geopolitical tensions have gradually impacted those advantages.

The nearshoring shift

An apparel small business that once sourced from Southeast Asia relocated part of its production to Mexico. While costs per unit were slightly higher, savings from reduced tariffs, shorter shipping times, and greater inventory control outweighed the difference. The move also aligned with growing customer demand for “Made in America” or regionally sourced goods.

Considerations for small businesses:

• Analyze your supply chain costs holistically, factoring in tariffs, shipping, and lead times—not just per-unit production costs.
• Explore trade agreements that make nearshoring attractive (e.g., USMCA).
• Start small: shift 10–20% of production regionally as a pilot program before scaling.

Building regional supply chains

Beyond manufacturing, even service-based small businesses can benefit from regionalization. A software small business, previously reliant on overseas subcontractors, began building relationships with nearshore teams in Latin America. Tariff risks didn’t apply directly, but the same principles—shorter communication lines, faster delivery, and reduced geopolitical exposure—brought value.

Considerations for small businesses:

• Look beyond physical goods—services and knowledge work also benefit from nearshoring.
• Regional suppliers often offer faster turnaround times and cultural alignment, adding long-term competitive edge.

Opportunity in disguise: Nearshoring is not just about avoiding tariffs—it’s about building resilience and agility in a volatile global economy.

Real-world small business examples

1. A Midwest Toolmaker: Faced with 25% tariffs on imported steel, the company diversified suppliers to include Canada and Brazil. While initial logistics costs rose, the business avoided dependency on a single tariff-heavy market.
2. A California Food Importer: Tariffs on specialty goods threatened margins. Instead of absorbing costs, the company implemented transparent dynamic pricing, clearly labeling “tariff-adjusted” items on menus. Customers accepted small price increases, preserving loyalty.
3. A Texas Manufacturer: Shifting production of key components to Mexico reduced tariff exposure and cut shipping times from six weeks to two, allowing the company to operate with leaner inventory.

Each example illustrates the same theme: tariffs are disruptive but not insurmountable. With proactive planning, small business can pivot toward stronger, more sustainable models.

Key insights for small business leaders

• Tariffs are here to stay. Even if today’s disputes resolve, geopolitical volatility means trade disruptions can recur. Building resilience now can pay long-term dividends.
• Diversification is defense. Spread your risk across multiple suppliers and markets. Don’t wait until a tariff hits to start exploring alternatives.
• Pricing agility is critical. Use transparent communication and dynamic pricing tools to help balance customer trust with financial health.
• Nearshoring is an opportunity. Reducing reliance on distant suppliers can help ease the impact oftariffs and enhance supply chain agility.
• Turn crisis into strategy. Treat tariffs as a strategic forcing function to rethink your operating model—not just a temporary hurdle.

Conclusion

For small businesses, tariffs can feel like yet another blow in an already uncertain world. Yet history shows that the most resilient businesses are those that can adapt in times of disruption. By considering these insights like market diversification, dynamic pricing, and nearshoring, small business can help navigate tariffs from unpredictable threats into opportunities for adaption and growth.

The real question isn’t whether tariffs will continue to affect business—it’s how small businesses will respond. Those who take steps to adapt today may be in better prepared to navigate future trade disruptions and may find themselves in a stronger, leaner, and more resilient position for growth moving forward.

Interested in Learning More About Uncertainty in the Workplace and How to Manage It? 

Check out www.trinet.com/navigating-uncertainty where we regularly post articles on how to address business  HR concerns and turn question marks into thoughtful steps.