Midsize Business Tariff Costs Triple as Trade Deficit Reaches Record High

The Hidden Cost of America's Trade War

America's midsize businesses are bearing an unexpected burden from the ongoing trade war. Tariff payments by these companies tripled over the past year , according to new research from the JPMorganChase Institute. This dramatic increase affects companies that employ a combined 48 million people in the U.S. — the very businesses that were supposed to benefit from protective trade policies.

The financial impact has been swift and severe. Trump increased the average tariff rate to 13% from 2.6% last year , targeting everything from steel, kitchen cabinets and bathroom vanities under national security provisions. These aren't abstract policy changes — they represent real costs that companies must absorb through higher prices, reduced hiring, or lower profits.

"That's a big change in their cost of doing business," said Chi Mac, business research director of the JPMorganChase Institute . The study focused on middle-market companies with revenues between $10 million and $1 billion, businesses that often lack the pricing power of multinational corporations to easily pass costs along to customers.

Supply Chains Shift as Companies Adapt

The tariff pressure is already reshaping global trade patterns. Payments to China by these companies were 20% below their October 2024 levels , suggesting businesses are actively seeking alternatives to Chinese suppliers. However, it's unclear whether that means China is simply routing its goods through other countries or if supply chains have moved .

"We also see some indications that they may be shifting away from transacting with China and maybe toward some other regions in Asia," Mac noted. This geographic pivot represents a fundamental restructuring of American business relationships that have been decades in the making.

The wholesale and retail sectors face particularly intense pressure. Among midsize firms, the wholesale and retail trade sectors have the highest direct exposure. Many of these operate on thin margins, so even small cost increases can lead to higher prices for customers .

Economic Reality Contradicts Policy Goals

Despite the administration's stated goal of reducing America's trade imbalance, the numbers tell a different story. Trade data published Thursday by the Census Bureau showed that the trade deficit climbed last year by $25.5 billion to $1.24 trillion . This represents a significant increase rather than the promised reduction.

The disconnect between policy intentions and economic outcomes has created tension within the administration. Kevin Hassett, director of the White House National Economic Council, lashed out on Wednesday at research by the New York Federal Reserve showing that nearly 90% of the burden for Trump's tariffs fell on U.S. companies and consumers .

Meanwhile, The Supreme Court is expected to rule soon on whether Trump surpassed his legal authority by declaring an economic emergency to implement some of these trade measures. The legal challenge adds another layer of uncertainty for businesses trying to plan their operations.

What This Means for American Consumers

The tripling of tariff costs for midsize businesses signals broader economic shifts ahead. These companies serve as crucial links in supply chains that deliver goods to American consumers. When their costs increase dramatically, those expenses typically flow through to retail prices, affecting household budgets across the country.

The research reveals how trade policy creates ripple effects throughout the economy. Midsize businesses, which often serve local and regional markets, may find themselves squeezed between rising import costs and customers' limited ability to absorb higher prices. This dynamic could reshape entire industries as companies seek new suppliers, adjust product lines, or reconsider their business models entirely.

As the Supreme Court prepares its ruling and businesses continue adapting to higher tariff costs, the true economic impact of America's trade policies is becoming clearer. The question now is whether these short-term disruptions will eventually deliver the promised long-term benefits, or whether they represent a costly miscalculation in the global marketplace.