Trump Tariffs and Iran War Fuel Financial Squeeze on California Small Businesses

Small businesses in California are facing a relentless barrage of economic pressures stemming from the Trump administration’s tariffs and the escalating war in Iran. The combined impact is driving up costs, shrinking sales, and forcing owners to slash staff and production just to survive.

Nichole MacDonald, who runs a women’s bag business in San Diego, reports a staggering 50 percent drop in sales compared to last year. After abandoning manufacturing in China due to tariffs, she shifted production to India, only to face a 25 percent spike in raw material costs there. “Each level of pressure, economic uncertainty and tightening of the purse strings impacts people’s decisions on spending,” MacDonald said. She has had to cut her staff from 11 to 3 and missed out on holiday inventory because tens of thousands of dollars went to tariff payments instead.

The Supreme Court recently invalidated much of Trump’s tariff regime, but uncertainty remains as new tariffs imposed under different laws are being challenged in court. Meanwhile, fuel prices have soared—California’s average gas price jumped to $5.55 per gallon, up from $4.79 last year—pushing shipping costs higher and fueling inflation. Port of Long Beach CEO Noel Hacegaba confirmed that shippers are now passing these costs onto small businesses and consumers through surcharges and higher rates. Amazon, USPS, UPS, and FedEx have all introduced fuel surcharges that squeeze small retailers the most.

Rema Abedkader, a San Diego-based women’s clothing designer, has had to cut production by half this year due to rising costs but is reluctant to raise prices for fear of losing customers. “We can only charge so much, so we’re having to eat that cost again,” she said. Her cuts ripple through the local economy, leaving pattern makers and seamstresses without work and forcing some to take second jobs.

Small businesses, which generate 99 percent of California’s net new jobs, are at a breaking point. Jonathan Gold of the National Retail Federation warned that these enterprises lack the financial cushion to absorb cost hikes and must pass them on to consumers—who are already tightening their belts.

Without swift government action, the survival of many small businesses—and the jobs they support—is in jeopardy. The Trump administration’s tariffs and the resulting economic chaos have not only failed to protect American workers but have deepened the financial pain for the very backbone of California’s economy.