The tariffs that kicked in yesterday—ranging from 10 to 50 percent on imports from nearly every country in the world—have finally brought a kind of certainty after four months of delays, reversals, and fraught negotiations. For America's smallest small businesses, this "certainty" comes at a steep price. Since January, an estimated 366,400 jobs have been lost at businesses with 10 or fewer employees. While tariffs aim to protect domestic industries for longer-term macroeconomic benefit, small businesses are in a particularly vulnerable position due to their limited resources, negotiating power, and ability to adapt to supply chain disruptions.
Over the past six months, my colleagues and I have spoken with entrepreneurs, government officials, nonprofit leaders, and fund managers across the country about their concerns—especially the one-two punch of inflation and tariff uncertainty. Understanding which industries and regions are bearing the brunt of the economic pain allows us to connect targeted solutions—even short-term measures—that can help businesses bide more time to survive, and ideally position themselves to thrive if the "America First" promise eventually unlocks new opportunities.
Philanthropy can take specific steps to strengthen small business ecosystems during this ongoing economic turbulence by targeting regions and sectors where tariff impacts hit hardest.
Key Sectors and Regional Disparities
Manufacturing industries face a paradox: the tariffs intended to protect them are simultaneously raising their costs. Industrial companies rely heavily on imported raw materials and components, so tariffs on these inputs effectively create a self-imposed tax on domestic production. Nineteen of the top 25 sub-sectors most affected by the new tariffs are in manufacturing. Consider a car manufacturer sourcing steel for chassis from one country, aluminum for bumpers from another, and dashboard electronics from a third—their options to offset these additional costs are severely limited.
Construction is another sector taking a direct hit. Tariffs on lumber, drywall, and other building materials are raising expenses for the nearly 200,000 residential building construction firms that are almost all classified as small businesses. The strain on already thin margins for these businesses inevitably gets passed on to would-be consumers, who currently cannot afford to purchase a home, exacerbating the existing housing crisis.
American agriculture faces dual pressures: higher costs on one side, and shrinking export markets on the other. Tariffs on imported fuel, equipment, fertilizer, and feed raise farmers' operating costs. At the same time, key trading partners, like China, have retaliated with tariffs on U.S. agricultural goods, reducing demand for our exports. Tariffs have widespread impacts that vary significantly across U.S. regions, with the Midwest and South bearing disproportionate burdens.
Analyses factoring in the overlapping sector exposure by state project Kentucky to take the most severe hit, with new tariff payments equivalent to about 4.1% of the state's GDP under the current policy. Indiana (3.9% of GDP), Tennessee (3.6%), Mississippi (3.5%), and Michigan (2.8%) round out the top five most affected states.
Beyond these regional concentrations, tariffs are also disrupting the logistics and transportation networks that form the backbone of our economy. The port of Los Angeles saw a 35% decline in scheduled vessels in early May 2025 compared to the previous year, showing that trade volumes were already contracting in anticipation of higher tariffs. This slowdown has severely affected trucking and logistics companies, especially the 157,000 small truck transportation businesses that rely on import-export flows. The impact extends beyond Southern California to coastal regions in Texas, the Carolinas, and other areas with significant port infrastructure.
Tailoring Support to Specific Needs
Challenge: Reliance on Uncertain Supply Chains
Unlike big corporations that can negotiate with alternate suppliers or stockpile inventory strategically, small firms typically lack the diverse supplier networks and procurement leverage to easily dodge tariffs. Similar to consumers, business owners resorted to stockpiling goods before the tariffs hit—tying up a lot of cash in inventory—or the opposite approach, freezing orders and delaying expansion, essentially putting growth plans on hold because they can't predict costs month to month.
Recommendation: Establish Regional "Tariff Response" Funds
Foundations with footprints in heavily affected areas can leverage their experience with disaster relief funds to pool resources for emergency assistance. Working capital loans through community lenders or short-term grants would provide rapid, flexible capital to small businesses at risk of layoffs or closure due to tariffs. This model has proven effective in past crises. During the COVID-19 pandemic, Truist Foundation created a $40 million sustainable financing vehicle to maintain credit flow to vulnerable businesses. A regional tariff response fund could follow another pandemic-era example by Prudential in Newark: combining philanthropic dollars, public funds, and bank capital to offer low-interest or deferred-interest bridge financing to tariff-impacted firms. Such funds should also provide supply chain diversification assistance—helping businesses find new suppliers or re-shore production where feasible. Intermediaries are well-positioned to convene local partners, while philanthropy can encourage multiple stakeholders (local governments, banks, corporations) to contribute, achieving scale while maintaining the local knowledge needed for effective targeting.
Challenge: Credit Squeeze and Financial Fragility
Even in the best of times, small firms typically operate on thin margins with limited credit. Now, tariffs are adding costs just as credit conditions tighten. Many businesses front-loaded imports in March and April 2025—rushing to bring in goods before higher duties took effect—which temporarily boosted import volumes but now threatens a shortage of supplies (and cash) later this year. Small enterprises already carry significant debt, with approximately 11 million small businesses holding revolving credit card debt, and millions more using business or personal credit for day-to-day operations. These existing debt burdens limit their ability to absorb new costs, whether for sourcing domestic supplies or upgrading equipment to bring manufacturing in-house. For the most vulnerable business owners, tariffs can rapidly push them from barely surviving into financial distress.
Solution: Partner with Mission-Driven Lenders to Expand Credit and Share Risk
In an environment of higher risk and uncertainty, traditional lenders often retreat precisely when small businesses most need capital. Foundations can step in as strategic partners to boost lending through community development financial institutions (CDFIs) and other mission-driven lenders. Partnerships and co-investments including Living Cities' members and impact investing portfolio have proven successful with risk-sharing mechanisms, such as first-loss capital or loan guarantees that backstop a portfolio of small business loans. By absorbing the top layer of risk, foundations encourage other investors to lend more confidently while shaping investment strategies that deliver targeted impacts for specific risks like those in the current climate. Philanthropic capital effectively serves as "trade shock insurance"—even modest guarantees or reserve funds for loans in vulnerable regions like the Midwest manufacturing belt could trigger a substantial increase in lending.
By acting decisively against this immediate threat, foundation leaders can protect their existing community investments and constituencies while building a foundation for a more resilient, inclusive, and equitable economy. While foundations cannot singlehandedly offset global trade disruptions, they can play a pivotal role in cushioning the blow and catalyzing broader solutions.