42% of Small Businesses Say Tariff Costs Are Crushing Their Hiring Plans in 2026

For job seekers at Metaintro, the rising cost of doing business at America's smallest employers is one of the most consequential labor market stories of 2026. Small businesses — defined as companies with fewer than 500 employees — account for roughly 46% of all private-sector jobs in the United States, according to the U.S. Small Business Administration. When these employers pull back on hiring, the ripple effects touch nearly every industry and every community.

A sweeping Federal Reserve Small Business Credit Survey of more than 6,500 firms found that 42% reported increased costs from tariffs as a primary financial challenge in the past year. The result is a hiring environment that one economist described as "no-fire, no-hire" — a holding pattern that leaves job seekers competing for fewer open positions while incumbent workers hold tight to the roles they have.

This article breaks down exactly how tariff-driven cost pressures are reshaping workforce decisions at small businesses, which sectors are hit hardest, and what it all means for your job search.

How Are Tariff Costs Squeezing Small Business Payrolls?

The math is straightforward: money that small business owners once budgeted for new hires is now going toward absorbing higher import costs. According to the Federal Reserve survey, 77% of small firms reported experiencing either rising input costs or reduced profit margins — or both — over the past year. Among those facing higher costs on foreign-sourced goods, 76% passed at least some of those increases to consumers through higher prices, while 60% also absorbed a portion internally by cutting expenses.

Matthew Hassett, CEO of Loftie — a 10-person company that sells sleep-focused products — put it bluntly to Fortune: "We didn't have extra money sitting around waiting to pay for these tariffs. We could either cut expenses or raise prices. And so we've cut everything we can… and there's no more to cut." That included letting go of consultants and leaving an open position unfilled.

This pattern is playing out across the country. Data from ADP shows that employment at businesses with fewer than 50 employees declined by 107,000 in 2025, making it one of the slowest years for small-business job growth in recent memory. In November 2025 alone, small businesses shed 120,000 jobs — even as medium and large companies managed modest gains.

Which Sectors Are Losing the Most Small Business Jobs?

The tariff squeeze is not hitting all industries equally. The Federal Reserve survey found that retail was the hardest-hit sector, with 69% of retail firms reporting tariff-related financial strain. Manufacturing followed at 62%, leisure and hospitality at 61%, and healthcare and education at 56%.

ADP payroll data from early 2026 confirms the uneven impact. In February 2026, professional and business services shed 30,000 jobs, manufacturing lost 5,000, and trade, transportation, and utilities declined by 1,000. Meanwhile, education and health services added 58,000 positions and construction gained 19,000 — suggesting that sectors less reliant on imported goods are weathering the storm better.

For job seekers, this creates a split labor market. If you work in retail, manufacturing, or hospitality, you are more likely to encounter hiring freezes or reduced hours at small employers. If your skills align with healthcare, education, or construction, opportunities remain more robust — at least for now.

One transportation equipment executive surveyed by the Federal Reserve wrote ominously: "We are starting to institute more permanent changes due to the tariff environment," including "reduction of staff, new guidance to shareholders, and development of additional offshore manufacturing." That language — "more permanent changes" — signals that some of these job cuts may not bounce back when costs stabilize.

Can Small Businesses Pivot to Domestic Suppliers and Protect Jobs?

One of the stated goals behind tariff policy is to encourage businesses to source goods domestically, which would theoretically create American manufacturing jobs. But the Fed survey data tells a different story for small businesses.

Only 13% of firms that reported price increases said they had switched to domestic suppliers. A mere 3% said they had successfully relocated production or services back to the United States. For most small businesses, the supply chain alternatives simply do not exist at competitive prices — or they lack the capital to make the switch.

As Metaintro CEO Lacey Kaelani told TestGorilla, workforce planning in uncertain environments requires businesses to analyze "skills adjacencies — who can be upskilled or promoted into current roles — and predict attrition risk before it becomes an issue." For small businesses with limited HR infrastructure, that kind of strategic workforce planning is a luxury many cannot afford.

The result is a workforce paradox: tariffs are intended to boost domestic employment, but the businesses that employ nearly half of all American workers are finding that higher costs leave them with less capacity to hire, not more.

What Does the NFIB Data Reveal About Small Business Hiring Intentions?

The National Federation of Independent Business (NFIB) Small Business Optimism Index dropped to 98.8 in February 2026, down from 99.3 in January. More critically for job seekers, the net share of businesses planning to increase employment fell for a third consecutive month — dropping four points to just 13%.

Despite the headline optimism number remaining near historical averages, the hiring intentions component tells a clearer story. Small business owners are entering 2026 with what the NFIB described as "cautious optimism" — they are not in crisis mode, but they are not expanding either. Taxes and costs have been reported as the top concern among small businesses for three consecutive months.

According to a Federal Reserve analysis cited by Fox Business, the economy could have added approximately 19,000 more jobs each month, on average, from January through August 2025 without the drag of tariff-related uncertainty. The Tax Foundation estimated that current tariff levels amount to an average tax increase of $1,500 per U.S. household in 2026 — money that flows out of the consumer economy and, by extension, out of the revenue streams that small businesses depend on to fund hiring.

How Is This Reshaping the Job Market for Workers?

The broader labor market data paints a picture of stagnation rather than collapse. ADP reported that private companies added just 63,000 jobs in February 2026, while January was revised down to only 11,000 additions. Chief economist Nela Richardson noted that hiring has been "choppy" as employers "weather cautious consumers and an uncertain macroeconomic environment."

For workers already employed at small businesses, the "no-fire, no-hire" climate means job security is relatively stable — layoffs have not surged — but wage growth is muted and advancement opportunities are scarce. Small business owners who cannot afford to hire new workers are also unlikely to offer significant raises to existing staff when margins are under pressure.

For job seekers, this environment demands strategic adaptation. Targeting sectors and company sizes where hiring remains active is essential. Mid-size and large employers, which have more capacity to absorb cost increases, have continued to add jobs even as small businesses pull back. Healthcare, education, and construction remain relative bright spots across employer sizes.

As Metaintro CEO Lacey Kaelani also told the Washington Times, "Employers need trained employees now, not in four years, and apprenticeships deliver that." For workers looking to pivot into in-demand fields, apprenticeship and skills-based training programs offer a faster path to employment in sectors that are still growing despite the tariff headwinds.

What This Means for Your Career

The tariff-driven hiring slowdown at small businesses is not a short-term blip — it is a structural shift that could persist as long as elevated import costs remain in place. Here is what you should know:

• Target growing sectors. Healthcare, education, and construction are adding jobs even as retail, manufacturing, and professional services pull back. Align your job search with where the openings are.
• Consider employer size. Mid-size and large companies have more financial cushion to absorb tariff costs without freezing hiring. If you have been focused exclusively on small business roles, broaden your search.
• Upskill strategically. With only 13% of firms switching to domestic suppliers, the reshoring boom has not materialized for most small businesses. But skills in supply chain management, logistics, and domestic manufacturing are becoming more valuable as companies explore alternatives.
• Watch the NFIB data. The monthly NFIB report is a leading indicator of small business hiring intentions. When the net share of businesses planning to hire starts climbing again, it will signal a loosening of the current freeze.
• Negotiate from a position of knowledge. If you are interviewing at a small business, understand that margins are tight. Be prepared to demonstrate immediate value and flexibility rather than pushing aggressively on compensation.

People Also Asked

Q: How many small business jobs have been lost due to tariffs in the US?

A: According to ADP data, employment at businesses with fewer than 50 employees declined by 107,000 in 2025, with small businesses shedding 120,000 jobs in November 2025 alone. A Federal Reserve analysis found the economy could have added roughly 19,000 more jobs per month without tariff-related uncertainty, suggesting the cumulative drag on job creation has been significant.

Q: Are small businesses still hiring in 2026?

A: Most small businesses are in a "no-fire, no-hire" holding pattern. The NFIB reports that the net share of businesses planning to increase employment fell to 13% in February 2026 — the third consecutive monthly decline. While outright layoffs have not surged, new hiring has slowed considerably as owners wait for cost pressures to ease.

Q: Which industries are most affected by tariff-related hiring slowdowns?

A: The Federal Reserve Small Business Credit Survey found retail (69%), manufacturing (62%), leisure and hospitality (61%), and healthcare and education (56%) were the sectors most likely to report tariff-related financial strain. ADP payroll data from early 2026 confirms that professional and business services and manufacturing have experienced the sharpest job losses.

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