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Small businesses already navigating the costs and chaos of tariffs must now also contend with the effects of the war in Iran.
“It just feels like things keep getting piled on top,” said Nichole MacDonald, owner of a San Diego business that sells women’s bags. “Not just for businesses, but for consumers. And what is a business without consumers?”
Since her customers are feeling financial pain just like her, they’re spending less money on discretionary items, she said. If they are still buying, they’re choosing denim bags over leather because they’re cheaper.
“Each level of pressure, economic uncertainty and tightening of the purse strings impacts people’s decisions on spending,” the Sash Bag owner said.
Other small retailers in the area tell similar stories of increased costs and having to adjust to continued tariff uncertainty in the wake of the Supreme Court decision that invalidated the bulk of President Donald Trump’s wide-ranging tariffs. In some cases, such as if they imported their own goods, they might be able to apply for tariff refunds, though the timeline for receiving refunds is unclear. The president also imposed new tariffs based on a different law, against which California and other states have filed a lawsuit.
Meanwhile, everyone has been hit with higher shipping costs because fuel prices have gone up. The average price for regular unleaded gas in the state is $5.55, up from $4.79 a year ago, according to AAA. The national average is $4.11 vs. $3.15 a year ago. The spikes in gas prices caused inflation to rise in March. Consumer confidence is at a record low.
Higher prices hit small businesses — defined as those with fewer than 500 employees — harder than big ones, and some wonder how long they can survive. That’s bad news for the state, whose small businesses create millions of new jobs a year and lately have been responsible for 99% of net new jobs, according to the California Office of the Small Business Advocate.
Lost sales, staff and more
MacDonald, whose business brings in six figures a month, said she saw her 2025 sales drop by up to 50% compared with the previous year. Because of tariffs, she stopped manufacturing products in China and has shifted entirely to India. She went from 11 staff members to three. And because she spent tens of thousands of dollars on tariffs, she said she didn’t have money to bring in inventory for the holidays.
She uses brokers to import her offerings, so she’s waiting to hear from them about possible tariff refunds. But even if she does eventually receive refunds, she said the damage has been done: “That money could’ve gone to personnel or to growth, instead of going to a tax.”
The president’s policies have had a global impact. Last week, MacDonald’s longtime manufacturing partner in India informed her that costs for raw material have gone up 25%, so that will mean higher costs for new production. After increasing prices about 10% last year, she will probably have to raise them again because she is working on thin margins, she said.
The top executive at the Port of Long Beach, one of the nation’s biggest ports, recently talked about higher costs being passed on to small businesses and consumers.
“For a while, shippers absorbed rising costs from fuel spikes to last year’s ‘Liberation Day’ tariffs,” said Noel Hacegaba, chief executive of the Port of Long Beach, during a media briefing earlier this month. “That’s no longer the case. Today, those costs are being passed along across the board. We’re seeing new surcharges and higher rates.”
He said major shippers are instituting fuel surcharges, and adjusting how they move cargo. Amazon is adding a 3.5% third-party seller surcharge for fuel and logistics. The U.S. Postal Service is planning a temporary 8% surcharge, and UPS and FedEx also have raised their surcharges.
Hacegaba was joined by Jonathan Gold, vice president at National Retail Federation, who said the nation’s small retailers are seeing a disproportionate impact. “Small businesses in particular don’t have the ability to absorb cost increases and typically have to pass those along to the end consumer,” Gold said.
‘We can only charge so much’
But small retailers don’t want to drive their loyal customers away.
Rema Abedkader is feeling the squeeze all around, with higher shipping costs being the latest pain point, but she hesitates to pass along the costs to her shoppers. The designer of women’s clothing said she does not want to raise prices because it will just deter those who are still spending.
“We can only charge so much, so we’re having to eat that cost again,” she said.
Abedkader, who makes her eponymous REMA clothing brand in the San Diego area but buys imported fabric from Los Angeles-based companies, said she had to cut back on production by about 30% last year, which meant fewer sales. This year, she has had to reduce production by about 50%.
Her decreased business has had a widespread effect on her local ecosystem, all of whom are small business owners themselves.
“When I’m not producing, there’s no work for my sewer, pattern maker and cutter,” she said. That causes a vicious cycle: “My manufacturer had to get a second job, so our business had to be put on the back burner.”
Abedkader said she’s working four times harder and is having to get creative with marketing and by doing wholesale locally.
“If the government doesn’t do something for small business, a lot of us are going to be going out of business very soon,” she said.
Like Abedkader, women’s apparel designer and maker Jennafer Grace Carter knows fabric brokers and importers in the Los Angeles area who have shut down because of tariff costs.
The Trump administration’s immigration policies have also affected her business. Carter, who uses imported materials but makes her clothing domestically, said a lot of people were afraid to come to work. One shop that had 25 people sewing now sees less than half of them coming to work, she said, adding that the workers are “here legally but look a certain way” so they are scared.
Her handmade Jennafer Grace brand has had to scale back on styles to adjust to that shift, she said.
The bottom line is that Carter is dealing with “less labor force, (fewer) materials and higher costs,” she said. She has raised her prices only incrementally, because people won’t buy if a business changes prices too drastically, she said.
Carter recently returned to California from direct-to-consumer events in Las Vegas and Scottsdale, Ariz. The U.S.-Israeli war in Iran has not only affected her shipping costs, it has also raised her travel costs. Her customers were in the same boat. She heard some attendees talking about how “it was so expensive to get here… I wanted to shop more.”
Higher costs’ long-term impact
The pain of higher costs seems unlikely to go away anytime soon. For one thing, the uncertainty continues.
“Whether it be on shores around the world or right here at home with erratic policy, it makes it very difficult for business people to plan,” said Gene Seroka, executive director of the Port of Los Angeles, during a media briefing this month.
Even those whose businesses have an opportunity to benefit from what’s going on are expressing pessimism.
“It’s going to be harder and harder for small businesses,” said Ellie Rose, owner of Calibaja Manufacturing, which contracts with U.S. businesses to make their products in Mexico. Those businesses avoid import tariffs because most products made in Mexico are still governed by the United States-Mexico-Canada Agreement — although the free trade deal is being reconsidered.
Rose said the small business owners she speaks with are seeing growing challenges. It’s taking a lot longer than before to get their products to the United States, she said — 100 to 165 days on a ship vs. the 30 to 60 days it used to take.
“That’s components, finished goods, whatever you need coming from Asia,” she said. “It’s going to slow everything down and cost more.”
And if or when fuel prices come back down, she doubts businesses will lower their prices because they’ve had to bear increased costs for the past couple of years. That’s going to affect innovation, Rose said: “Down the line this is going to be more of a problem for everybody.”
Newport Academy received numerous state citations before closing Pleasanton clinicsApril 28, 2026 6:00 am
