Small Business Owners Confront Affordability Crisis Amid Rising Costs
(CBS) — A growing number of small business proprietors are grappling with an escalating affordability crisis, primarily propelled by heightened tariffs, surging health insurance expenses, and increasing energy costs.
Shirley Modlin, the owner of 3D Design and Manufacturing based in Powhatan, Virginia, articulated her struggles to CBS News, revealing that her mounting operational expenditures are impeding her ability to provide salary increments and health insurance for her ten employees.
Modlin’s enterprise specializes in fabricating metal components for diverse industries, including automotive and pharmaceuticals. She pointed out that the unpredictability concerning U.S. tariff rates adds a layer of complexity to her cost forecasts.
“As the year concludes, my staff anticipates some form of raise; however, I remain uncertain about the extent I can accommodate, given the impending influence of tariffs,” she confided to CBS News.
“I find myself in an incessant balancing act. If I refrain from raising prices while my costs ascend, it significantly constricts my profit margins,” she elaborated.
At present, U.S. importers confront an average effective tariff rate of 16.8% — the highest recorded since the 1930s, according to data from the Yale Budget Lab, a nonpartisan policy research organization.
Recent analysis from the Center for American Progress (CAP) indicates that small business importers incurred approximately $25,000 more monthly, owing to the tariffs instituted during the Trump administration between April and September, compared to the corresponding timeframe in 2024.
“What should be a season of generosity has morphed into a period of financial strain for America’s 36 million small businesses,” stated Senator Ed Markey, a Democrat from Massachusetts, during a press conference convened by the U.S. Senate Committee on Small Business and Entrepreneurship.
“They are bearing the burden of heightened healthcare expenses, inflated electricity costs, and the ramifications of Trump’s tariffs on nearly all fronts.”
The Supreme Court is poised to deliberate on the legality of Mr. Trump’s country-specific tariffs imminently. However, legal experts contend that should these tariffs be annulled, alternative measures could still be employed to impose similar levies.
Assigning Responsibility
A spokesperson for Republican members of the Senate Committee on Small Business and Entrepreneurship attributed the tribulations faced by small businesses to Democratic policies.
“Four years of Democratic governance in Washington has precipitated an unprecedented affordability crisis for small businesses, catalyzing soaring inflation and the imposition of an extraordinary $1.8 trillion in new regulations,” the spokesperson commented to CBS News.
“In just 11 months, Republicans have commenced the restoration of stability by enacting the most significant tax reduction in history, alongside a regulatory rollback amounting to $907 billion initiated by the Trump administration.”
“The outcomes are evident as we recently observed a record surge in holiday shoppers, core inflation sinking to its lowest levels in five years, and tangible wage increases of $1,000 for hardworking Americans,” the spokesperson reinforced.
Neither the White House nor the Small Business Administration provided comments regarding the affordability predicaments highlighted by small business owners.
Another pressing concern for Modlin and her workforce is the impending expiration of enhanced tax credits for health insurance under the Affordable Care Act (ACA) at the end of 2025, a development experts warn could precipitate a significant rise in premiums for over 20 million Americans.
An October analysis by CAP indicated that approximately 4.4 million small business owners and self-employed individuals would incur an average health insurance cost increase of $1,500 should ACA subsidies expire.
In 2024, Modlin extended a $350 monthly stipend to employees to alleviate health plan expenses. Currently, she faces a dilemma: whether to augment this monthly contribution or provide wage boosts.
Modlin asserted she lacks the financial leeway to pursue both options, voicing concerns over the potential loss of skilled machinists to larger firms.
“I have had candidates express the necessity for superior health insurance benefits,” she revealed. “While our other benefits are commendable, I simply cannot match the escalating insurance costs.”
Julie Robbins, CEO of Earthquaker Devices, a manufacturer of guitar pedals located in Akron, Ohio, reported a staggering 30% upsurge in costs this year, attributing it largely to the sharply elevated U.S. tariffs on imports.
Robbins, who co-runs the business with her spouse, procures thousands of components from over a dozen countries to assemble pedals in Ohio.
She disclosed that the company has already expended an additional $60,000 on tariffs this year, a figure projected to escalate to at least $180,000 by 2026.
Earthquaker is poised to implement modest price hikes starting in January, prompted by rising costs from suppliers. Robbins candidly acknowledged the potential risk of alienating customers through price increases.
“It is nearly impossible to gauge the demand impact from a price hike, which is why we strive to avoid such adjustments whenever feasible,” she shared with CBS News.
In November, a notable 34% of small businesses elevated their average selling prices, marking an unprecedented increase from preceding months, as reported by Bank of America analysts, referencing data from the National Federation of Independent Business.
Bank of America remarked that this trend indicates businesses are transferring tariff and inflation-induced costs onto consumers.
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