Small business owners across the United States are pulling back on plans to add staff as higher costs from new import duties cut into their earnings. Data from the National Federation of Independent Business shows that the share of small firms intending to hire fell from thirteen percent in April to twelve percent in May. Because these smaller companies have less cash on hand, they often adjust their payrolls before larger firms do. As a result, many have trimmed employee hours, put off bringing on new workers, or even let some people go to help balance their books.
Many of these firms rely on goods and raw materials from overseas. When the government raises duties on those items, importers pay more and pass that cost on to buyers. Higher costs affect everything from manufacturing supplies to food items. For example, a restaurant owner might pay more for flour and meat, while a craft producer may see prices rise for plastics and metals. When costs go up and they cannot raise prices enough to cover the gap, owners end up earning less on each sale. That gap often leads them to look for ways to save money.
And small firms usually have thin reserves. That means they feel the pain faster than big companies. Large chains may have weeks of cash and credit lines to cover extra expenses, but many small shops operate day to day with little buffer. When import costs move up, these owners face a choice: swallow the cost or cut staff. Many choose the latter because payroll often stands as one of their biggest expenses.
According to the same trade group report, nearly half of the owners who saw profits shrink in recent months said they cut back on new hires. Some had to reduce the hours of existing employees. Others asked staff to share roles or handle tasks outside their usual duties. A few owners said they froze pay increases and bonuses until sales improved again. These moves help in the short term, but they can take a toll on morale and slow long-term growth.
At the same time, some business leaders are turning to different cost controls. A few have invested in basic automation tools that speed up tasks like billing and scheduling. Others have shifted some work to contractors who only get paid when a project is done. And some owners have asked workers to rotate through multiple jobs so the shop can run with fewer people on site. These steps let firms spread out work without adding full time staff.
Economists warn that when small companies pause hiring, the effect ripples through local communities. With fewer paychecks hitting the streets, household spending can slow, which in turn hits other businesses. In towns where a small factory or shop is a big employer, cuts to hours or jobs can be felt in restaurants, grocery stores, and service firms.
Tariffs on steel, aluminum, electronics, and certain consumer goods have been a particular pain point. Many owners say that costs rose quickly and they had no warning. In some cases, suppliers passed on price increases in one lump sum rather than gradually, making it hard for shop owners to plan. Some say that they must now decide each month if they can afford to bring on an extra pair of hands or if they need to keep staff levels where they are.
Looking ahead, small business owners hope the pressure eases. They are watching trade talks and any hints of changes in duty rules. Until then, many will stick with their smaller staffs and find other ways to serve customers without adding new jobs. But if costs continue to climb, local job markets could remain tight, and more owners may cut back further to keep their doors open.
