Supply chains are now a cost problem more than a delivery problem for small businesses. In the Federal Reserve Banks' 2026 survey of employer firms, 48% sourced at least some inputs from outside the United States, a large majority of those saw the prices of those inputs rise, and more than four in 10 firms named tariff-related cost increases as a financial challenge.
How many small businesses depend on foreign suppliers?
Nearly half of small employer firms depend on foreign suppliers for at least part of what they buy. The Fed's 2026 Report on Employer Firms found that 48% of firms sourced at least some inputs from outside the United States in 2024, and 14% did so for more than half of their inputs.
That 14% is the group most exposed to import costs, because a price change on most of what they buy flows straight into their margin. The survey also found that a large majority of firms with foreign inputs reported year-over-year price increases on those inputs between 2024 and 2025. For a retailer, restaurant or contractor, that shows up as higher landed costs on inventory, parts and materials long before it shows up anywhere else on the books.
Trade runs the other way too. About one in five firms sold to international customers in 2024, though for most of them those customers made up less than 10% of total sales.
How are tariffs affecting small business costs?
Tariffs have become one of the most widely reported cost pressures for small businesses. More than four in 10 firms in the 2026 Fed survey said increased costs associated with tariffs were a financial challenge, and 77% reported rising costs of goods, services or wages, tariff-related cost increases, or both.
The pressure is concentrated in industries that buy physical goods. Tariff-related cost challenges were most prevalent in retail (69% of firms) and manufacturing (62%), which are also the sectors that hold the most inventory. Rising costs of goods, services or wages remained the single most common financial challenge across all firms, so for many owners tariffs are adding to a cost squeeze that was already there. Our retail small business statistics show how that squeeze plays out for store owners specifically.
How do small businesses respond to higher supplier costs?
Most small businesses pass some of the increase to customers and absorb the rest, and only a small share change suppliers. Among firms whose foreign inputs rose in price, 76% passed at least some of the increase on and 60% absorbed at least some of it, according to the Fed's 2026 report.
| Response to higher input costs | Share of firms |
|---|---|
| Passed at least some costs on to customers | 76% |
| Absorbed at least some cost increases | 60% |
| Switched to domestic suppliers | 13% |
| Switched to different foreign suppliers | 8% |
| Relocated production to the United States | 3% |
The low switching numbers make sense for a small business: finding, vetting and qualifying a new supplier takes time, minimum order quantities can be higher, and a domestic alternative may not exist or may cost more. Because the shares add to more than 100%, many firms are doing several things at once, usually a partial price increase plus some margin given up. If you are deciding how much to pass on, our guides to small business pricing strategy and building pricing tiers cover how to raise prices without losing your best customers.
What do supply chain costs mean for inventory and cash flow?
Higher and less predictable supplier costs mean a small business needs more working capital to carry the same amount of inventory. When the same order costs more, or has to be placed earlier to beat a price change, more cash is tied up on the shelf before any of it is sold.
Worked example: a shop that reorders $20,000 of stock every quarter needs $2,000 more cash per order if its supplier costs rise 10%, or $8,000 more a year, before it has raised a single price. If it also orders a month early to get ahead of an expected increase, that cash is tied up for an extra month as well.
- Track landed cost per unit, including freight and duties, so price changes show up in your margins right away.
- Reorder from data, not habit. Our guide to inventory management covers reorder points and safety stock.
- Line up working capital before you need it. A business line of credit or inventory financing is easier to arrange before a price spike than during one.
The Broker Shop is a broker, not a lender: one application is matched to the funders whose guidelines you meet, so you can compare offers side by side. It is free to apply, and checking your options won't affect your credit score.
Need cash to carry more inventory?
One 2-minute application is matched to the funders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →The bottom line: Nearly half of small employer firms rely on foreign inputs, more than four in 10 cite tariff costs as a financial challenge, and most respond by splitting the increase between their prices and their margin, which makes tracking landed costs and lining up working capital early the practical defenses.
Frequently asked questions
Sources: Federal Reserve Banks — 2026 Report on Employer Firms, Small Business Credit Survey (48% sourced inputs abroad, 14% for more than half; more than four in 10 cited tariff costs; 77% rising costs and/or tariffs; retail 69%, manufacturing 62%; 76% passed costs on, 60% absorbed, 13% domestic, 8% different foreign, 3% relocated; about one in five sold internationally). The worked example is illustrative.
Found these figures useful? You are welcome to cite or link to this page. Suggested attribution: “Small Business Supply Chain Statistics 2026,” The Broker Shop — thebrokershopinc.com/small-business-supply-chain-statistics.html. Every figure links to the Federal Reserve Banks' 2026 Small Business Credit Survey report.