Raise Prices or Don't? Tariff Tips for Small Businesses

A selection of terrariums lined up on a shelf in a shop.

(Image credit: Getty Images)

Tariffs have put businesses and the customers they serve in a bind.

In May 2025, 61% of midsize businesses and 59% of small businesses said tariffs would negatively affect them — up from 51% and 54% two months earlier, according to a survey by Bredin.

Concerns about operating costs are rising: 74% of midsize businesses and 72% of small businesses now say tariffs will increase their costs.

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When tariffs were first announced, many small-business owners scrambled to make fast, high-stakes decisions. Some rushed to stockpile inventory before price hikes took effect. Others froze large orders to avoid overcommitting amid uncertainty and/or reevaluated suppliers.

Many began diversifying their supply chains, sourcing from new countries or vendors and reevaluating whether to manufacture in-house or continue outsourcing.

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These choices, often made under pressure, continue to evolve as businesses weigh cost, control and customer expectations in a volatile trade environment.

Beyond individual businesses

The ripple effects extend beyond individual businesses. As small firms scrambled to adjust, some began pulling back on capital investments, delaying equipment upgrades, hiring plans or expansion efforts.

Others, like at the start of the pandemic in March 2020, took the opportunity to innovate, jumping at a chance to outpace competitors.

For example, a New York-based wholesaler of high-end tableware sources 100% of its inventory from the EU. The company decided to accelerate purchases earlier in 2025 in anticipation of increased tariffs.

Due to the uncertainty of tariff levels, the company postponed pricing increases to its customers until tariff levels were better defined.

As a result, it had to absorb pressures on profit margins by postponing expansion plans and incremental hiring.

A Brooklyn-based terrarium business that sources a significant portion of its glass containers from China decided to import a larger quantity of supplies earlier in the year to secure inventory at current prices and to get ahead of increased tariffs.

Due to uncertainty around future tariffs, it postponed raising prices for customers until the situation became clearer.

The company absorbed cost pressures by reinvesting profits into inventory, anticipating that the tariffs on imported goods could significantly affect their prices.

By ordering a larger quantity of supplies in advance, they aimed to secure their inventory at current prices and avoid the immediate impact of the tariff changes.

Consumer confidence affected

Rising prices and uncertainty have started to weigh on consumer confidence, especially in discretionary retail. These broader shifts are reshaping not just how businesses operate, but how customers spend.

So, should small businesses absorb higher product costs, or pass them on to customers?

For business owners, here's what to keep in mind.

If absorbing the costs:

Steady prices protect customer loyalty, especially when shoppers are already feeling stretched. Conversely, sudden price jumps might drive customers to competitors.

This may be an opportunity to trim expenses behind the scenes — from renegotiating supplier contracts to cutting non-essentials — to maintain healthy profit margins. Some steps to consider:

Cash-flow tools are more than just a helping hand. They'll show projections for different pricing options (both purchase and sales) in addition to helping consider whether financing might bridge the gap during a transitionary period.
For some businesses, uncertainty is a force function for innovation. Be intentional with decision-making about sourcing, product mix, operations and even branding without disrupting the customer experience.

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Steps to consider if passing costs on to customers:

Signal transparency by communicating the "why" behind price changes — many customers understand the impact of global trade shifts. Trust between consumers and businesses (especially small businesses) is not to be underestimated.

Maintain healthy margins to ensure the business can continue investing in people, inventory and innovation. Saving money and keeping margins wide is not the only way to ensure business continuity.

Segment pricing strategies — some products or customer groups may be more tolerant of increases than others.

Reinforce value through service, quality or local sourcing to justify the higher price point.

As small businesses wrestle with whether to eat rising costs or raise prices, the ripple effects will shape what we pay, what's on the shelves and how confident business owners feel about the future.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mark Valentino is President and Head of Business Banking at Citizens. Under his leadership, the Business Banking team brings comprehensive advice and solutions to help small businesses operate at every stage of their journey. Mark rejoined Citizens in October 2023 after leading a privately owned healthcare provider in Southern California. During that time, including his role as CEO of LA Downtown Medical Center, he dedicated his energy and efforts to expanding mental health access to the underserved communities of greater Los Angeles.