Paying More for Inventory? Here Are Tariff Mitigation Strategies for SMBs

For small and mid-sized manufacturers (SMBs), the recent tariff hikes have been a tipping point.

As of May 2, the United States ended the de minimis exemption on sub-$800 imports from China and Hong Kong, initially subjecting everyday business shipments to tariffs as high as 145%. In some cases, new flat fees now exceed the value of the goods themselves.

While a temporary trade agreement has since lowered those tariffs to 30 to 54%, small businesses across the country (and beyond) are already feeling the pain through layoffs, emergency loans, and canceled orders. Policymakers may point to long-term “Made in America” gains, but the short-term fallout is hitting hard.

One card game entrepreneur recently shared that he’s had to liquidate his personal bonds to cover the tariff bill on his next holiday order. Similarly, a tent maker in Colorado laid off part of his fabrication team and cut production in half, and another founder opened a UPS invoice only to find that a $5,649 shipment came with an $8,752 tariff bill.

This crisis isn’t looming. It’s already here. And while the headlines often focus on macroeconomics, the reality on the ground is much more personal. For many SMBs, the business is the owner's life savings. Many don’t have the cash reserves or staffing to navigate sudden changes in customs codes or supply chains. What was once a strategic choice (working with a specialized overseas supplier) has become a liability almost overnight, and they are now scrambling.

Our own numbers at Katana tell a similar story. According to our data, SMBs are now paying nearly 30% more per unit than they were a year ago, even before the latest tariffs hit. Costs from nearshore partners like Mexico and Canada rose over 50% between January and March. Demand has remained steady, but margins are still vanishing.

How SMBs Can Mitigate the Effects of Tariffs

So, what can small businesses do? Here are three steps we’re seeing forward-thinking SMBs take to minimize damage and, in some cases, regain control before the next wave of disruption.

1. Get Ahead of the Supplier Conversation (Now)

One of the most brutal realities of this moment is that small businesses often don’t have the luxury of multiple suppliers. Many founders built deep relationships with a single manufacturer in China over the years and switching is both a cost issue and an operational one as well.

Still, those waiting to act will be in worse shape. Companies that began investigating supplier diversification in Q1 are now reaping the benefits. Some are moving part of their production to Southeast Asia. Others are identifying backup suppliers in Eastern Europe or even testing reshoring within North America.

Even if you can’t switch now, start the conversation. Ask suppliers about tariff mitigation strategies, volume discounts for consolidated orders, or shifting final assembly elsewhere. And if you’re considering bringing production stateside, don’t wait for the SBA to host a webinar. Start by searching for U.S. manufacturers or connecting with your local chamber of commerce for referrals.

2. Treat Inventory Like a Financial Lever, Not a Line Item

Many SMB owners are still thinking about inventory the way we all did pre-Covid: buy what you need, when you need it. That worked in a stable economy; in 2025, that approach could kill your margins.

We’re seeing smart businesses flip that script. One cosmetics brand modeled a 25% raw materials hike using their ERP platform, then adjusted batch sizes and increased buffer stock only for their most profitable stock keeping units (SKUs). That move helped preserve margin without overloading their warehouse.

Others are shifting from just-in-time to “just-in-case” not across the board, but selectively. If you're importing components subject to new tariffs, consider larger, less frequent orders to reduce shipping volume and minimize per-shipment surcharge risk. Yes, you’ll tie up more capital upfront but it’s still cheaper than paying double to ship the same goods next month.

3. Turn Weekly Procurement Reviews Into a Survival Habit

If you're only revisiting your sourcing strategy once a quarter, it’s already too late. SMBs that are surviving at this moment have implemented weekly procurement and inventory reviews (some daily). That doesn’t require a huge team. It just means carving out the time to review what's working, what's stalling, and what policy changes are hitting your orders right now.

The de minimis change is likely just the beginning. The White House has signaled that more tariffs could be coming on finished goods. What matters now is how quickly you can model scenarios, reroute orders, and adapt pricing before it’s too late while paying attention to every news cycle to stay ahead of what might come.

What to Do If You’re Already in Crisis

For businesses already feeling the pain of tariffs, know this: you’re not alone. Try to be transparent with customers about pricing shifts and lead time changes. You may be surprised by how many will support you—especially wholesale buyers who rely on your product.

Talk to your financial advisor or lender about short-term options. A working capital line may help you weather the storm without gutting your team or taking on expensive investor equity too early. Also, now is the time to double down on SKUs with high margin and stable inputs and pause the ones eating your budget.

As we head into back-to-school season and the holiday season after it, the businesses that survive this year won’t necessarily be the ones with the lowest costs or the largest teams. But they will be the ones with the clearest visibility, the most flexible approaches and strategies, and the willingness to adapt despite the pressure.

About the Author

Ben Hussey

Ben Hussey is the co-CEO of Katana Cloud Inventory, an inventory management platform that helps companies manage over $3 billion in sales annually. Ben has led many successful sales and revenue teams, helping businesses enhance their e-commerce, manufacturing, inventory, and order management capabilities. In addition to these roles, Ben spent a decade working for a large telecommunications company, leading commerce initiatives of varying sizes and types—from initiation to delivery and run-time. He’s passionate about the impact software can have on a business and working with high-performing teams to deliver results.

Company: Katana Cloud Inventory
Website: www.katanamrp.com
Connect with me on LinkedIn.