As an economist, I don’t like protectionism because higher taxes on trade make an economy less efficient, which means less growth and prosperity (as described in the first four columns – here, here, here, and here – of this series).

As a moral person, I don’t like protectionism because trade barriers are now a major source of political corruption in Washington.

Lobbyists are getting rich pushing for special exemptions and loopholes.

And guess who is paying those lobbyists? It’s almost entirely big companies with deep pockets.

Small businesses, by contrast, have little choice but to endure the pain.

How much pain? We have an answer from the Federal Reserve Bank of New York, thanks to new research by Will Aarons and Asani Sarkar.

Here are some excerpts.

How has the recent implementation of tariffs affected small businesses? …we use data from the 2025 edition of the Small Business Credit Survey (SBCS) to explore this question… We find that the majority of national firms in the goods and retail sectors reported experiencing financial challenges due to tariffs in 2025, with even larger shares of regional firms doing so. In response, about 80 percent of national and regional firms passed on at least some of the higher costs of imported inputs to customers, while about 60 percent absorbed some of the costs, as many firms did some of both. Firms that faced greater tariff challenges in 2025 were more pessimistic about employment and revenues in 2026. …The chart below shows that a substantial share of small businesses reported tariff-related costs as a challenge in 2025. Nationally, the share of firms reporting tariff-related challenges was 55 percent in the goods sector, 67 percent in the retail sector and 34 percent in the services sector… Across all sectors, 80 percent or more of businesses reported challenges due to general cost increases… Our findings align with research showing that mid-sized firms (those with 50-499 employees) paid sharply higher tariffs in 2025. …About 80 percent of goods and retail firms, nationally and regionally, reported passing on at least some of the costs to customers. Consistent with partial pass-through of tariff costs, about 60 percent of these firms reported absorbing at least some of the cost increases internally.

Here’s the chart referenced in the article.

The FRBNY article also discusses the reason small businesses are disadvantaged compared to large companies.

Large firms may mitigate the incidence of higher input prices from tariffs by legal means and, more generally, have greater ability to maintain price markups. Smaller, less profitable firms with fewer resources are less able to do so. …In the SBCS survey, firms reported their expectations for employment generation and revenue performance in 2026. We have shown previously that regional small businesses were unusually pessimistic about their 2026 prospects. …Small businesses in the nation and in the region are vulnerable to higher prices of imported inputs. …Tariff-related challenges are associated with higher imported input costs and greater pessimism about generating employment and revenues in 2026.

Here’s one more chart from the article. It shows the degrees to which businesses swallowed costs, passed costs on to consumers, or both.

I’ll conclude by observing that protectionism does sweeping damage.

Consumers are hurt, obviously, when businesses pass along the cost of trade taxes. But businesses also are hurt since higher prices presumably mean fewer sales.

And if businesses absorb the cost, that mean less income for small business owners. And that probably hurts employees at small firms as well.

The bottom line is that Trump’s protectionism is an unmitigated disaster. Heck, it doesn’t even achieve the misguided goal that Trump uses as an excuse for his big tax increases on global trade.