The Third Wave of Tariff Consequences

Trump is stupidly acting as if his tariffs are a "one-and-done" proposition. But the ones who will be "done" are America's small businesses.

In a previous post, I wrote about the second wave of consequences that we’re about to experience — empty store shelves, increased prices, slowdowns in shipping.

But what can we expect to experience after that second wave? We’ve been hearing warnings about Christmas being ruined because the vast majority of toys purchased in the United States are manufactured in and imported from China. (Suck it up, all you kids with 30 dolls. The king has decreed that you only need two dolls.)

As disappointing as Trump’s “war on Christmas” will be for millions of kids, there are likely far more severe follow-on effects of the tariffs affecting adults. Big box retailers will, of course, see downturns in profits because of those empty store shelves and increased prices. But where the third wave will hit the hardest will be with small businesses.

Will Target and Walmart survive a toy shortage? Of course they will. They’ll certainly take an economic hit, perhaps a significant one, but their businesses are large enough — mammoth, actually — so that they’ll come out the other side. They may be bruised but they’ll still exist.

Will that independent toy store in small town America survive a toy shortage? That’s questionable, perhaps even doubtful.

Will Apple and other tech manufacturers survive supply chain issues? Like the big box stores, they’re going to be OK. The tech leaders also have some leverage with the Trump administration, having cozied up with Trump and literally having had a seat at the table since before the inauguration.

But what about those mom-and-pop computer repair shops — the ones where you take your tech devices for repairs when your phone screen is cracked or your laptop battery no longer holds a charge? Those stores are going to be the ones who take the most impactful economic hits from supply chain shortages and increased costs. Many will not have sufficient margins to ride out the tariffs for a still undetermined amount of time.

How about that local manufacturing plant that may have been around for generations? What happens when the raw materials they need are no longer priced in a way in which that local manufacturer can turn a profit?

What happens to the tax base in the towns where those small businesses are forced to shutter? Schools, roads, police forces and other first responders — that’s where the downstream (did someone say “trickle-down”?) effects of Trump’s tariffs will hit hardest.

If you think these scenarios won’t have much of an overall impact, you may have underestimated the impact of small businesses on the national economy. Just under half of all private sector employees work in small businesses. What happens when small businesses are forced to lay off employees or, even worse, shut down because they’re no longer financially viable?

Trump may have been lucky enough to have enjoyed fairly healthy job numbers in the first few months of his time in office. But those numbers are likely to tank soon, particularly when you add job losses in small businesses to the number of jobs being cut in the federal government.

The next step following job losses, of course, is more personal bankruptcies, more losses in IRAs and 401(k)s, and more defaults on loans — SBA loans, mortgages, and personal loans. Predictions around these financial impacts are less precise, but are inevitable to some extent.

Also inevitable are people who defer maintenance on their homes, affecting plumbers, roofers, local contractors. In economic downturns, people also delay addressing health concerns, exacerbating existing conditions or leaving new health issues unaddressed.

Here’s an ominous reminder: All this unnecessary negative pressure on small businesses is happening in the wake of the Trump administration having slashed the SBA’s workforce by 40%. Some of the safety nets that the Small Business Administration provided can no longer be counted on.

The “third wave” impacts of these tariffs on middle America also come on the heels of massive cuts to numerous other programs and services that the federal government has historically provided but that Trump and the DOGE bros are cutting. The flimsy premise those cuts are based on is that state and local governments are going to make up the difference. But there already isn’t sufficient funding at the state and local level to pick up the tab. But small businesses get gutted or shut down completely, with the result that the local tax base is diminished, it makes it even more difficult for smaller communities to thrive.

Trump’s absurd and utterly unnecessary tariffs are no longer merely just creating a trickle-down effect. They’ve become a massive snowball rolling downhill, increasing in both speed and mass, poised to crush everything in its path.