The Hidden Toll of Tariffs: Why Small Retailers, and Your Retail Space, are Potentially at Risk

The Hidden Toll: How New Tariffs Are Hitting Mom  & Pop Retailers

1. Rising Inventory Costs & Squeezed Margins

New U.S. tariffs, between 10% and 145%, are significantly raising costs for import-dependent small retailers. The U.S. Chamber reports that 97% of U.S. importers are small businesses, many operating on razor-thin margins (U.S. Chamber). An AP News feature highlights how small tea, décor, and games shops have seen products stranded overseas and invoices skyrocket, threatening their survival (AP News).

2. Slumping Sales & Changing Consumer Habits

According to NPR, small retailers voice urgent concerns amid broad-based tariffs, 98% of retailers say they’re vulnerable (NRF). Business Insider reports that collectibles and specialty shops have passed cost increases to customers, who in turn are changing spending habits, turning to chains or delaying non-essential purchases (Business Insider).

3. Rising Store Closures & Vacancy Pressures

AP News details stories of mom‑and‑pop firms facing dire straits: one games company cited $500,000 in stranded goods and warned it might not survive four more months (AP News). The Atlantic reports rapid closures, thousands of small retailers, as erratic tariff announcements dampen both consumer demand and business planning (The Atlantic).

Landlords in retail corridors are seeing growing vacancy rates. With fewer tenants, leasing concessions such as rent reductions or flexible terms are becoming more common to retain occupancy.

4. Paused Expansion & Slowed Leasing Activity

The U.S. Chamber explains that small retailers are hitting pause buttons on expansion strategies, opting to delay leases or renegotiate deals (U.S. Chamber FAQ). Meanwhile, Reuters reports retailers like Levi’s trimming SKUs ahead of the holiday season, anticipating continued fluctuation (Reuters).

How Tariffs Impact Small Tenants, Rents & Vacancies

Strategies to Face the Challenge

Tenants Can:

• Diversify sourcing to low or no-tariff countries or nearshore suppliers, as advised by NerdWallet (NerdWallet).

• Communicate transparently with customers about cost increases to maintain trust.

• Renegotiate leases for flexible structures like rent abatement or revenue sharing.

Landlords Can:

• Offer adaptive rent models (step‑ups, performance‑based).

• Provide TI allowances for longer lease commitments.

• Target resilient tenants with local supply chains or essential services.

Why This Matters

• Community fabric is at risk – vacant storefronts weaken neighborhood vitality.

• Occupancy stability boosts property value, but requires lease flexibility.

• Supporting small retailers supports community and economic resilience.

Ready for Smarter Leasing in a Volatile Market?

The trade winds are shifting and leasing strategies must shift too. At illi Commercial Real Estate, we specialize in:

• Adaptive lease structures: rent abatements, performance-based models, TI packages

• Tenant curation: placing independent, import-resilient retailers

• Strategic lease negotiation to optimize occupancy and long-term returns

Let’s Talk

Want to protect your retail space and invest in resilient tenants?

Contact illi Commercial Real Estate today for a custom leasing strategy that supports both landlords and small businesses even in tariff-driven times.