Small U.S. Retailers Brace for Holiday Disruptions as Tariffs on China Trigger Supply Chaos

Small retailers enter the holiday season with shrinking inventories, rising costs, and shifting supply chains as tariff uncertainty reshapes their busiest months.

For many small U.S. retailers, the year-end shopping season has turned unusually unpredictable as shifting tariff policies on Chinese imports disrupt supply chains.

Businesses that rely heavily on China for production say they are struggling to secure adequate stock, leaving them vulnerable during the most profitable period of the year.

Matt Hassett, founder of New York-based sleep wellness brand Loftie, said the rapid tariff changes have left his company operating with only a fraction of the inventory required.

He explained that holiday preparation became increasingly difficult, with product deliveries delayed and stock levels hitting their lowest point in years.

A major challenge emerged when tariff rates on Chinese goods fluctuated dramatically, forcing small companies to choose between paying high import duties or moving production to alternative countries at an even greater cost.

Some retailers considered shifting manufacturing to markets like Thailand, India or Cambodia, only to find that new supply chains carried higher expenses and longer timelines.

The constant changes eventually pushed many businesses back to their original suppliers in China, but the back-and-forth decisions created delays.

As a result, companies entered the holiday season — including Black Friday — with lower-than-expected inventory and reduced capacity to meet consumer demand.

November and December typically contribute up to one-third of annual retail profits in the U.S. With smaller companies already operating on tighter margins, inventory shortages risk pushing them further into financial strain.

Brooklyn-based travel brand Lo & Sons spent months exploring multiple manufacturing hubs across Asia in response to tariff threats.

Despite efforts to diversify production, the company returned to its long-term Chinese supplier, citing the unpredictability of tariff rates as a primary challenge.

The uncertainty prevented firms from placing purchase orders early in the year, resulting in significant delays.
Executives say they now face lower stock availability and higher costs during their most critical sales window.

Meanwhile, large U.S. retailers such as Walmart and Costco are better positioned to manage disruptions, thanks to greater leverage and financial resilience.

Their scale allows them to absorb higher duties more smoothly, widening the competitive gap between major chains and small independent businesses.

Recent data shows that operating margins for small retailers with assets under $50 million have dipped sharply into negative territory.

The shift has placed over one-third of these companies at high risk of bankruptcy, underscoring the growing financial pressure across the sector.

Some small brands have been forced to make difficult decisions to cope with rising costs.
This includes cutting jobs, reducing product lines and decreasing order volumes to preserve cash flow heading into 2026.

New York jewelry company Haus of Brilliance moved part of its production to Thailand and the United States after facing high tariffs in India, one of its main manufacturing bases.

The company completed its first Thai production run just in time for the holidays, but it still anticipates shortages well into the new year.

Loftie’s Hassett expects a shipment to arrive for Black Friday, but the delay has already cost the company a significant number of sales.
He estimates that with adequate inventory, the brand could have earned nearly 50% more revenue this season.

Across the retail landscape, rising costs, fragile consumer sentiment and rapid policy changes are creating an environment of instability.

Small retailers say they are adapting as best as they can, but many remain concerned about long-term sustainability if tariff swings continue.