(Killer Startups)—Ryan Petersen, co-founder and chief executive of logistics platform Flexport, says the new 145 % duties Washington has slapped on most Chinese imports could be an extinction-level event for small U.S. importers.
Speaking on “The Prof G Pod,” he said that about 80 % of small businesses that buy from China will just die if the tariffs stay in place, wiping out millions of jobs and a meaningful slice of Main-Street entrepreneurship.
His alarm is not theoretical.
Flexport’s own ocean-freight bookings out of China fell 35% in the week after the tariff hike, a collapse Petersen believes could be 50 % industry-wide. Less cargo means less revenue and less cash-flow for the thousands of boutique brands that depend on steady, low-cost supply from Chinese factories.
Tariff shock: 145 % duties squeeze already-thin margins
The trigger for Flexport’s doomsday math arrived on 2 April 2025, when President Trump unveiled so-called “Liberation Day” tariffs — blanket duties of 145 % on almost every Chinese-made product entering the United States. Combined with earlier sector-specific levies, some goods now face effective rates as high as 245%.
For Fortune 500 importers, the new cost is painful but (mostly) survivable; they can wield scale to renegotiate with suppliers or spread the extra expense across giant product lines. A ten-person e-commerce company has no such luxury.
Petersen notes many of Flexport’s small clients sell discretionary items — think backyard pizza ovens or custom pet accessories — that consumers simply forego if prices double. Demand disappears, inventory sits, and working capital dries up.
Government data underline the exposure:
In 2024, Americans imported $439 billion in Chinese goods — more than 13 % of all imports—powering roughly $2 trillion in downstream retail sales once mark-ups are included. Remove that flow overnight, and shelves, cash registers, and PayPal carts all go quiet.
Why small businesses are uniquely at risk
Small firms import from China because the system has rewarded scale, speed and razor-thin margins for years. Those same advantages flip to liabilities once triple-digit duties hit the border.
Four structural weaknesses make smaller players especially vulnerable:
- Concentration risk. Most U.S. SMEs importing finished goods rely on a single country for supply. For three-quarters of them, that country is China. Few have the staff, capital, or contacts to juggle multiple sourcing hubs on short notice.
- Lower negotiating power. Chinese factories built for massive volume happily pivot to Nike or Apple, but a 3,000-unit order from a niche brand often gets ignored.
- Tariff pass-through is harder. Big-box chains can spread a few dollars of extra cost across hundreds of SKUs — a micro-brand with one hero product risks losing its audience if it jacks prices 40%.
- Working-capital crunch. SMEs typically wire suppliers 30–50 % upfront and pay the balance on shipment. A sudden 145 % duty can exceed an entire quarter’s cash reserve, and only 17 % of small firms say they can secure emergency financing easily.
Can supply chains pivot?
Corporate America has talked for years about “China + 1” strategies — adding factories in Vietnam, India, or Mexico. Big apparel names have moved some stitching to Southeast Asia, yet the overall sourcing map remains China-centric. Capacity is limited and often booked years ahead by giant buyers.
Mexico, the political darling of the near-shoring narrative, is attracting marquee projects — a $5 billion Tesla plant in Monterrey among them. But smaller U.S. firms report sticker shock: Mexican labor costs exceed China’s, industrial land prices have soared, and cartel-linked security issues raise insurance premiums.
Infrastructure bottlenecks — from congested ports at Manzanillo to limited cold storage in Veracruz—further constrain quick shifts.
Even U.S. production is no refuge. Domestic apparel makers still import fabrics, buttons, and zippers that now also carry tariffs, notes the American Apparel & Footwear Association. Inflationary pressure simply moves up the chain.
Legal push-back and political wobble
The pain is fueling lawsuits.
On 14 April, five SMEs — ranging from a New York wine importer to a Virginia educational-kit maker — sued the administration in the U.S. Court of International Trade, arguing the president overstepped his authority under the International Emergency Economic Powers Act by unilaterally imposing tariffs. Conservative litigators at the Liberty Justice Center call the duties “devastating.”
Politically, the White House is sending mixed signals. President Trump acknowledged that tariffs set too high would mean “people aren’t going to buy,” and officials told The Wall Street Journal the administration may consider cutting duties back to 50-65 %.
Until a deal materialises, uncertainty itself is corrosive. Owners can’t price goods, sign supplier contracts, or plan holiday inventory.
Survival playbook: Diversify, digitise, advocate
Even under bruising tariffs, small importers aren’t powerless. Trade consultants sketch out a five-step triage plan to keep cash flowing while Washington and Beijing spar:
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Diversify incrementally. Trade advisers urge SMEs to start with low-risk moves: shift one SKU or component to an alternate country, test lead times, then expand. Partial diversification can soften future tariff shocks without gutting working capital.
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Lighten inventory. Flexport recommends keeping two to three months of stock—enough to ride out transit delays but avoiding over-commitment if demand slumps or duties spike (Flexport Market Update).
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Use duty-drawback and tariff engineering. Importers can sometimes reclaim duties on re-exported goods or alter component sourcing so final assembly qualifies for a lower tariff bracket.
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Automate landed-cost modelling. Cloud tools that update duty rates in real time help merchants price accurately and avoid margin surprises.
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Join coalitions. Trade groups from the National Retail Federation to the Cato Institute are collecting small-business testimonials and pushing for exemptions or phased roll-outs of any new tariff layers. Collective lobbying often carries more weight than lone pleas.
Petersen himself remains cautiously optimistic that economics, not politics, will ultimately dictate policy.
“If the goods stop, many will die,” he told FreightWaves. For tens of thousands of entrepreneurs, the hope is that the retreat happens before the balance sheets do.
The bottom line
Flexport’s 80 % warning is dramatic, yet grounded in hard math: thin-margin firms can’t absorb triple-digit duties overnight.
Tariffs that aim to punish Beijing risk flattening Main Street first.
Whether through legal action, political compromise, or supply-chain ingenuity, small businesses now face a race against time to escape the blast radius of the trade war — before Petersen’s grim forecast becomes tomorrow’s bankruptcy headline.