The End of Wait-and-See: What Small Businesses Are Learning About Geopolitical Risk in 2026

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Geopolitical Risk

Here is the short version of the last year and a half: prices on imported goods went up, they stayed up, and small businesses got hit harder than anybody else. That is not an opinion. That is what the Federal Reserve found when it surveyed small business owners across the country (Aarons & Sarkar, 2026).

This post explains what happened, why it hit small businesses hardest, and what the businesses that are handling it well are actually doing, in plain English, with every fact backed by a real source listed at the bottom.

What Happened

A tariff is a tax on things brought into the country. The business doing the importing pays it, not the foreign country. Since April 2025, there has been a 10 percent tariff on almost everything imported into the United States, with much higher rates on goods from certain countries.

Here is the part many owners do not realize: you do not have to import anything to feel this. If your supplier imports parts, materials, or products, their costs went up, and they pass those costs to you. Your risk was never about where you sell. It is about where the things you buy come from, and where the things your suppliers buy come from. The Fed found that about 8 out of 10 businesses paid more for imported supplies in 2025 than the year before (Aarons & Sarkar, 2026). One research group added it all up and estimates tariffs are costing American small businesses about 85 billion dollars a year (American Action Forum, 2026).

Why Small Businesses Get Hit Hardest

Big companies have lawyers, backup suppliers, and lines of credit. Most small businesses have one supplier, thin margins, and a bank that says no. The numbers back this up: small firms expected their sales to drop almost 9 percent because of all this, while big firms expected less than half that hit. And only about 1 in 4 small importers has good enough credit to borrow money to get through it, compared to 7 in 10 large ones (American Action Forum, 2026).

That credit gap matters more than it looks. Every real fix for this problem costs money up front: finding a second supplier, stocking up on inventory, riding out a rough quarter. If the bank will not lend it to you, you are locked out of the very solutions that would save you. The costs still come; the tools to handle them do not. That is the trap.

In other words: exact same hurricane, but in a much smaller boat.

What Changed This Year

A year ago, most small business owners were waiting to see if this would blow over. More than half said exactly that in surveys. And honestly, waiting made a certain kind of sense at the time. Nobody wants to spend real money switching suppliers or stockpiling inventory if the whole policy might get reversed next month. Waiting was a bet that this was temporary.

It was not temporary. The costs kept coming, month after month, and at some point the math flipped: waiting started costing more than acting. So owners stopped waiting. Today, 97 percent of small businesses surveyed say they are actively doing something about it (Netstock, 2026).

Three big shifts stand out. First, about a third of small businesses found new suppliers this year, and nearly half now buy from more than one region instead of betting everything on one country (Netstock, 2026). Second, they are planning further ahead. Around three-quarters now plan their inventory on longer timelines, so a surprise does not become an emergency (Netstock, 2026). Third, they raised prices. Last year, most owners quietly ate the extra costs to keep customers happy. That stopped being possible. Now 82 percent are passing costs on to customers (Netstock, 2026).

One thing worth knowing about that last shift: raising prices can be a panic move or a smart move, and the difference shows. The businesses handling this well did not just mark everything up overnight. They raised prices deliberately, on the right products and by the right amounts, and they told their customers honestly why. Same action, completely different outcome.

What the Smart Ones Are Doing

The businesses coming through this in the best shape are all doing some version of the same five things:

1. Getting a backup supplier. Not replacing the one they have, but adding a second option in a country with lower tariffs, so no single government decision can wreck their costs overnight.

2. Planning further out. Looking months ahead on inventory instead of weeks, so there is time to react.

3. Raising prices on purpose, not in a panic. Telling customers honestly why, raising them where it makes sense, and protecting the products that matter most.

4. Reading their supplier contracts. Some contracts let suppliers pass tariff costs straight through. Some do not. Knowing which one you signed matters before the next renewal.

5. Paying attention. Trade news used to be background noise. For any business that buys physical goods, it is now business news.

The Bottom Line

None of this requires a corporate budget or an economics degree. It requires knowing what is actually happening, having a plan, and acting before the next disruption instead of after it. Big companies have had teams doing this for decades. And here is the truth about that: the gap between them and you was never about brains. It was about access to the playbook. And access is a problem that can be fixed.

This is what this website and The Muninn Group are here for.

Please note: The observations and insights in this post are general in nature. The Muninn Group shares general analysis and observations in this Insights section. Specific strategic recommendations for your business require a direct engagement where your particular situation, market, competitive position, and financial reality can be assessed properly. Your first consultation is always free. The Muninn Group will not hand you a deck full of buzzwords.

Works Cited

Aarons, W., & Sarkar, A. (2026, July 9). Effect of tariffs on U.S. small businesses. Federal Reserve Bank of New York, Liberty Street Economics. https://libertystreeteconomics.newyorkfed.org/2026/07/effect-of-tariffs-on-u-s-small-businesses/

American Action Forum. (2026). The impact of tariffs on small businesses. https://www.americanactionforum.org/research/the-impact-of-tariffs-on-small-businesses/

Netstock. (2026). 2026 Tariff Impact Report. https://www.netstock.com/research/2026-tariff-impact-report/

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Philip White is the Founder and Principal Consultant of The Muninn Group, North Carolina’s premier strategic consulting firm. He is an Economist, Political Strategist, Geopolitical Risk Analyst, and accomplished Public Speaker based in Wilmington, NC. Contact: havi@themuninngroup.com | 910-632-0431 | themuninngroup.com

Geopolitical Risk

For the better part of five decades, geopolitical risk management existed as an enterprise-tier discipline: a function staffed, budgeted, and institutionalized almost exclusively within multinational corporations whose asset footprints and cross-border revenue streams justified the overhead. The prevailing assumption, rarely interrogated because it was rarely tested, held that firms below a certain scale threshold were effectively insulated from geopolitical shock by the domesticity of their operations. The tariff regime of 2025 and 2026 has falsified that assumption comprehensively and at scale. What the past eighteen months constitute, in effect, is a natural experiment in the transmission of trade policy shock through the small and medium-sized enterprise (SME) sector, and the emerging data permit three conclusions: the exposure was structural and universal; the initial strategic posture was untenable; and the adaptive responses now visible across the sector represent a compressed, involuntary adoption of enterprise risk disciplines that were always applicable at small scale but never before demanded there.

I. The Structural Asymmetry Nobody Priced In

Any analysis of the strategy gap must begin with a corrected picture of what the American economy actually is. Small and medium-sized enterprises represent approximately 97 percent of all U.S. importing firms while simultaneously possessing the thinnest resource buffers against input-cost volatility (LeMay & McMahon, 2026). The U.S. Chamber of Commerce places the population of small importing businesses at roughly 242,000 firms, collectively accounting for approximately one-third of total U.S. import volume (U.S. Chamber of Commerce, 2025). The sector’s exposure, in other words, was never marginal. It was systemic. What rendered it invisible was a category error in how exposure was conceptualized: direct importation was treated as the relevant risk perimeter, when the true perimeter encompassed every firm positioned downstream of an importing supplier. Under that corrected definition, the exposed population approaches the entirety of the goods economy.

The realized costs have validated the structural reading. The Federal Reserve Bank of New York’s analysis of the 2025 Small Business Credit Survey (published this month, and notable for being among the first institutional assessments built on comprehensive survey data rather than anecdote) found that a majority of national firms in the goods and retail sectors reported tariff-attributable financial challenges, with approximately 80 percent of firms nationally reporting elevated imported input prices in 2025 relative to 2024 (Aarons & Sarkar, 2026). The American Action Forum’s estimate places direct tariff costs to the small business sector at approximately 85 billion dollars annually, before accounting for the indirect cost stack: compliance burden, supply chain reconfiguration expense, and the competitive disadvantage that accrues to firms unable to arbitrage the rules as sophisticated importers can (American Action Forum, 2026).

II. The Capital Access Constraint as Risk Multiplier

The most analytically significant finding in the current literature concerns not the magnitude of the shock but its distributional incidence. Large and small firms absorbed nominally identical tariff schedules and experienced materially different outcomes. That is the signature of differential adaptive capacity rather than differential exposure. Federal Reserve Bank of Atlanta data cited by the American Action Forum quantify the gap: small firms projected sales approximately 9 percent below normal levels against 3.5 percent for large firms, and only 27 percent of small importers possessed credit profiles sufficient to access new lending, versus 70 percent of larger importers (American Action Forum, 2026).

The credit statistic deserves particular emphasis because it converts a trade shock into a liquidity trap. A firm that cannot finance the working capital required to hold larger inventory buffers, qualify alternative suppliers, or bridge a margin compression cycle is structurally denied access to precisely the mitigation strategies the environment demands. Transaction Cost Economics predicts this asymmetry cleanly: the fixed costs of supply chain reconfiguration (search, qualification, contracting, and relationship-specific investment) do not scale down proportionally with firm size, and therefore consume a categorically larger share of small-firm resources (LeMay & McMahon, 2026). Large firms mitigate through legal recourse, markup persistence, and balance-sheet depth. Small firms, lacking all three, mitigate through operational adaptation or not at all.

III. From Optionality Deferred to Optionality Exercised

Against that backdrop, the behavioral data from 2025 to 2026 document one of the fastest strategic posture shifts observable in any modern SME dataset. In mid-2025, 57 percent of small and midsize businesses characterized their tariff posture as wait-and-see, and nearly half had never implemented any tariff mitigation strategy. Twelve months later, 97 percent report at least one active mitigation strategy in deployment (Netstock, 2026).

Real Options Theory offers the correct analytical frame for both the initial hesitation and its abandonment (LeMay & McMahon, 2026). Under genuine policy uncertainty, deferral carries option value: committing capital to supply chain reconfiguration before the policy environment resolves risks stranding that investment if the regime reverses. Wait-and-see was therefore not irrational in its moment. It was an implicit bet that the volatility was transitory. What the 2026 data record is the sector-wide repricing of that bet. With a 10 percent baseline tariff persisting as a constant, punctuated by the February Supreme Court ruling and the escalation around the Strait of Hormuz beginning in March, conditions industry observers have termed structured volatility, the option value of waiting collapsed, and the expected cost of inaction overtook the expected cost of premature commitment (Netstock, 2026). The exercise of deferred options, once triggered, was rapid and broad: approximately 35 percent of SMBs changed suppliers within the year, nearly half now source from multiple regions, and close to three-quarters have extended inventory planning horizons, a deliberate trade of just-in-time efficiency for buffer-stock resilience that Supply Chain Resilience Theory would classify as a shift from static optimization toward adaptive capacity (LeMay & McMahon, 2026; Netstock, 2026). China remains the most affected sourcing geography, cited by 74 percent of respondents, which explains the prevalence of augmentation strategies (maintaining legacy Chinese supply relationships while qualifying secondary sources) over outright decoupling, whose transaction costs remain prohibitive for most product categories (Netstock, 2026).

IV. Pricing Power as a Strategic Signal

The pricing data tell a parallel story of exhausted absorption capacity. In 2025, 44 percent of small businesses were internalizing tariff costs, a margin sacrifice deployed as customer-retention strategy. By 2026, 82 percent report passing costs through to customers, with direct price increases as the dominant mechanism (Netstock, 2026). The New York Fed’s national survey data corroborate: roughly 80 percent of firms passed on at least a portion of tariff costs while approximately 60 percent absorbed a portion, the overlap indicating hybrid strategies under margin duress (Aarons & Sarkar, 2026).

Two readings of the passthrough shift are available, and both are correct. The first is distress: absorption became fiscally unsustainable, and passthrough is the involuntary transmission of the shock to the household sector, with attendant second-order demand risk as cumulative price increases propagate through supply chains. The second is discipline: the movement from silent margin erosion toward deliberate, communicated repricing represents the sector acquiring, under duress, a strategic pricing capability it historically lacked. The firms that will exit this period strongest are those for whom passthrough was a designed decision, segmented by product, communicated to customers, and calibrated against elasticity, rather than a panicked across-the-board adjustment. The distinction between those two firms is not resources. It is method.

V. Trade Policy Uncertainty as a Non-Tariff Barrier

The tariff schedule itself understates the operative burden. The economics literature defines trade policy uncertainty as the condition in which firms lack clarity regarding future tariff rates, agreements, and retaliatory actions, and finds that uncertainty functions as a trade barrier in its own right, suppressing investment and supply chain commitment even where no duty is ultimately collected (LeMay & McMahon, 2026). The first half of 2026 has supplied that condition in institutional form: a Supreme Court ruling in February that reshaped the legal architecture of the tariff regime, and a maritime chokepoint crisis in the Strait of Hormuz from March onward whose energy and shipping implications reach cost structures thousands of miles from the strait itself (Netstock, 2026).

The strategic lesson generalizes beyond the current episode: geographic domesticity is not exposure insulation. A firm’s risk perimeter is defined not by where it sells but by where its inputs originate, transit, and reprice. Under that definition, essentially every goods-adjacent business in the American economy holds an unhedged geopolitical position. The only open question is whether that position is managed.

VI. The Convergent Playbook

The adaptive behaviors now visible across the sector converge on five disciplines, each a small-scale instantiation of established enterprise practice. First, sourcing diversification under an augmentation logic, the China Plus One architecture, which purchases optionality against single-jurisdiction policy risk at the cost of manageable supplier-qualification investment. Second, extended planning horizons underwritten by genuine demand and inventory visibility, converting forecasting from intuition into instrumentation. Third, strategic pricing: deliberate, segmented, communicated passthrough that preserves customer trust while defending margin. Fourth, contract intelligence: auditing supplier agreements for tariff passthrough clauses and repricing triggers before renewal cycles arrive, because the allocation of policy risk between counterparties is a negotiated term, not an act of nature. Fifth, environmental monitoring: the reclassification of trade policy developments from background noise to operational intelligence with direct income-statement relevance.

None of these disciplines requires enterprise scale. Each requires framework, data, and the willingness to act ahead of disruption rather than behind it. Each requires, in other words, precisely the analytical capacity that has historically been priced out of the small business market. The wait-and-see era did not end because small business owners changed temperament. It ended because the environment repriced patience, and the sector responded with a speed that should permanently retire the assumption that sophisticated risk management is a large-firm monopoly. The capability gap was never cognitive. It was access, and access is a solvable problem.