The U.S. supply chain is bracing for another shake-up. The Trump Administration has officially ended the de minimis exemption for imports with a value of under $800 from China and Hong Kong — a move that imposes tariffs of up to 120%, or flat surcharges on tens of thousands of low-value shipments. While the headlines have largely focused on the macroeconomic consequences, small and mid-sized businesses are already living the reality behind the numbers.

Even before the policy changed, SMBs were seeing dramatic shifts in their procurement costs. According to a Vistage Worldwide survey from March, more than 40% of small-business owners say economic conditions have worsened compared with a year ago — nearly double the share from just a few months ago. What we’ve observed over the past quarter has been quite striking: a sharp climb in input costs, particularly from North American trade partners. From January to February, average procurement costs from Mexico and Canada increased by roughly 20%. By March, those same categories surged over 50%. And compared to this time last year, SMBs are now paying nearly 30% more per unit across essential inputs — despite keeping order volumes consistent.

To call this inflation alone would be an oversimplification. It’s fragmentation in real time, driven by unstable trade policy, retaliatory tariffs, unpredictable shipping lanes,and a patchwork of regional regulations that change faster than most businesses can adjust. For large enterprises with global logistics teams and supplier diversification already in place, this environment is difficult. For SMBs, it ‘s detrimental.

What makes this moment particularly dangerous for smaller manufacturers is the lag effect. Most SMBs don’t have the in-house compliance resources or freight contracts to absorb rapid changes in landed cost. Many are still negotiating supplier terms based on pre-2024 assumptions. And without immediate access to real-time data or forecasting tools, they’re often reacting weeks or months too late to secure favorable alternatives. But that doesn’t mean they’re standing still.

Across the board, three types of actions are emerging from the most forward-thinking SMBs — actions that may well determine who weathers this next phase of disruption, and who doesn’t.

Rewriting the sourcing playbook. The first shift is a fundamental reassessment of sourcing strategy. While enterprise manufacturers have had multi-region redundancy baked into their supply chains for years, SMBs are now recognizing the cost of relying too heavily on a single country, port or vendor. That’s particularly true when that source is China. Some companies are diversifying into Southeast Asia, Eastern Europe or even North America, accepting slightly higher per-unit costs in exchange for more predictability and tariff insulation.

In consumer electronics, for instance, one small business began consolidating component orders through a Vietnam-based supplier earlier this year. The move not only reduced tariff exposure ahead of the May 2 change, but it also eliminated repeated delivery delays that had plagued their shipments through Chinese ports. Their landed costs actually decreased as a result.

Treating inventory as a strategic asset. The second trend is the abandonment of “just-in-case” strategies in favor of smarter, more scenario-driven inventory management. The businesses navigating this moment best aren’t hoarding — they’re taking planning seriously. They’re using enterprise resource planning (ERP) software and inventory intelligence tools to simulate tariff scenarios, model currency shifts and align batch production with pricing volatility.

In one recent case, a cosmetics manufacturer ran a simulation to test the impact of a sudden 25% increase in raw ingredient costs. Based on those projections, they tweaked their order cycles, adjusted batch sizes and increased safety stock only for the SKUs most exposed to volatility. That allowed them to hold margin without sacrificing availability — a razor-thin balancing act that would have been impossible without system-level visibility.

Some manufacturers are lobbying for tariff exemptions. Others are engaging in “tariff engineering” — redesigning products or reclassifying them to avoid higher duties. Tactics have ranged from moving assembly stateside to adding Velcro to holiday outfits or felt to sneakers to qualify for lower rates. While not every strategy will work this time around, these behind-the-scenes maneuvers show just how much pressure businesses are under — and how far they’re willing to go to stay competitive.

Moving from quarterly to weekly planning. Third, SMBs are compressing their decision-making timelines. A year ago, many of these companies reviewed their procurement strategy on a quarterly basis. Now, weekly meetings are the norm. Procurement leaders are getting a seat at the executive table, tasked with monitoring live changes to backorders, customs delays and supplier reliability metrics.

Depending on how trade policy evolves, we could see additional tariffs, new retaliatory restrictions, or rapid changes to customs enforcement before year’s end. Weekly scenario planning is no longer optional — it’s a survival strategy, and one that’s helping many stay afloat.

While these challenges are most acutely felt by smaller manufacturers, the effects will reverberate up and down the supply chain. When SMBs can’t absorb new tariffs, products don’t ship. When component costs spike, consumer prices follow. And when a third of the manufacturing base is forced to throttle output due to procurement volatility, the ripple effects hit every tier of the economy — from warehouse operators to e-commerce platforms to end customers.

The businesses that will emerge stronger from this moment are the ones building operational optionality now. That means more agile sourcing, more granular visibility into cost drivers, and more empowered procurement teams. Tariffs may be the catalyst, but resilience will be the long-term differentiator.

As we track the fallout from this major shift and whatever comes next, one thing is clear: SMBs that are thinking ahead are the ones most likely to remain standing.

Ben Hussey is co-chief executive officer of Katana Cloud Inventory.