Small U.S. retailers face holiday supply chaos as tariffs bite ahead of Black Friday

26 November 2025

Small- and mid-size U.S. retailers are scrambling for inventory this holiday season, as import tariffs tied to new trade policies wreak havoc on supply chains just when demand typically peaks. The upheaval is forcing many businesses to scramble, cut back offerings and brace for what may be a lean end to the year.

Retailers say the primary challenge stems from unpredictable including sometimes steep tariff rates on goods sourced from overseas. Brands that relied on Chinese manufacturing or that attempted to pivot production to countries such as India, Thailand or Cambodia have found the cost and complexity rising anyway. For some, the upshot has been drastic: stock levels as low as 10 percent of what they had planned.

Take, for example, a sleep-wellness company based in New York. As the holiday season approached, it discovered that far fewer of its essential products had arrived than expected. “We could’ve made 50 percent more sales if we had enough inventory,” said the founder.

Across the small-retailer landscape, the effects have been sharp: business-analytics firm RapidRatings estimates that for retailers with total assets under US$50 million, operating margins have plunged into negative territory. Nearly 36 percent of these smaller firms are now classified as “high risk” for potential bankruptcy compared with 12 percent among larger retail chains.

Some shop owners have responded by cutting staff, reducing product offerings or postponing expansion plans altogether. Others grapple with a difficult choice: raise prices to offset tariff-driven cost surges or risk selling products at a loss.

The timing could not be worse. The holiday period, including Black Friday and Cyber Monday, typically accounts for a significant portion of annual revenue for many independent retailers. Missing inventory or being unable to deliver popular gift items could mean the difference between breaking even and closing up shop.

Meanwhile, larger retailers with deeper pockets and more diversified supply networks are weathering the storm more easily. Their capacity to absorb tariffs, renegotiate contracts or stockpile inventory gives them an advantage that smaller brands simply cannot match.

Even when smaller retailers tried to re-source production to alternate countries in anticipation of tariffs, they encountered fresh obstacles: longer shipping times, rising manufacturing costs and still-uncertain duties. One jewelry brand attempting a move to Thailand reported that although production had been completed, arrival times remained uncertain raising the risk that items may miss the holiday season altogether.

The ripple effects extend beyond retail shelves. Supply-chain disruption and shrinking inventories are putting pressure on prices, reducing choice for consumers, and straining small businesses’ cash flows. Some retailers fear that supply chaos, combined with inflation and consumer belt-tightening, could permanently damage customer loyalty at a time when every sale counts.

The crisis underlines the vulnerability of smaller retail firms in a shifting global trade environment. While tariffs and trade policy might be headline news at a national level, on Main Street it translates into shelves half empty, difficult decisions about whether to absorb costs or pass them on, and dreams of expansion put on hold. For many independent retailers, this holiday season is a stress test and not just for profitability. It may determine who survives.