3 Ways Small Businesses Can Survive the $150B Tariff Shock with Ashish Kothari

Ashish Kothari

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Ashish Kothari:

 Hi, dear friends. Welcome to a special episode of The Happiness Squad Podcast.

Over the last three or four days, we’ve seen close to $9.6 trillion in value lost in the stock market. Retirement portfolios are heavily impacted. The S&P is down 13%, mid-caps are down 15%. It’s a time of unprecedented turbulence in external markets—like we’ve never seen before.

The new tariffs and the tariff war we’re in the midst of are putting unprecedented pressure on small and medium businesses. This podcast is specifically for all the owners, executives, and leaders in small to medium businesses.

Let me highlight why this segment is so important. We are a $29 trillion economy. Half of that is driven through small and medium businesses. Almost 40–50% of employment comes from them, and most new job creation happens in this sector. That’s close to $15 trillion in economic value created by these businesses.

Even if you assume that 10% of that value is tied to imports, we’re looking at $1.5 trillion being impacted. A minimum 10% import tariff means these businesses face $150 billion in headwinds. This is unprecedented and could put even healthy businesses under severe stress.

Most of these businesses don’t make a lot of money. Many are smaller, without the resources to run operations and think strategically at the same time. They already struggle with attracting, retaining, and developing talent. That’s why we decided to record this podcast.

Toward the end, I’ll share a set of actions we’re taking at Happiness Squad to support small and medium business owners in navigating this storm.

There are three key things we need if we’re going to weather the storm and come out of this unscathed. How well we manage these three skills will determine how much of this $150 billion headwind we can offset—and more importantly, what personal price we’ll pay to do so.

Now, if we do this right, we can actually make the most out of the situation. You’ve probably heard, “Never let a crisis go to waste.” That’s the silver lining here. But regardless, we need to navigate the storm effectively.

So, here are three key things any small or medium business owner can start doing now:

I don’t know if you’re a sailor, but when it becomes cloudy and dark and storms roll in, what’s the first thing we need to do? We need to find calm within.

Today, I’d be surprised if any individual running a small or medium business—or even operating in one—isn’t feeling a surge of emotions. Fear, anxiety, panic, anger, frustration, stress... all of these will be present. That’s because both your business profitability and your personal retirement accounts are eroding rapidly. More importantly, the level of volatility is making it incredibly hard for you to manage your business.

What do I tell my customers? What do I tell my suppliers?

Many of you might even have products that are on the water right now—products that are going to hit the dock at lower price points than what you’ll be able to sell them for.

So here are the three skills we need:

1. Adaptability and resilience.

If we’re going to survive and thrive, we must do it from a place of inner calm. Becoming more adaptable and resilient is essential, and I’ll highlight a set of things you can do to build that muscle.

2. A data-driven approach.

We need to double down on leveraging data to truly assess impact. Facts are going to matter. Data is going to matter. Many small and medium businesses run on long-standing relationships. Relationships drive business. But now, more than ever, you need the data. Data and analytics capabilities will be critical.

3. Negotiation excellence.

You’re going to need to sharpen your negotiation skills—with both customers and suppliers.

In this podcast, I’m going to cover all three of these strategies—and I’ll also talk about how we at Happiness Squad are gearing up to support you in this moment of urgent need.

Adaptability and Resilience

Let’s start with adaptability and resilience.

This was a topic I researched quite extensively while at McKinsey. The good news is that, if there was any silver lining from COVID, it was that we knew it was going to bring high levels of stress and a fundamentally different way of working. A post-COVID world was going to look different—and adaptability and resilience were going to be key to win.

So, we invested a significant amount of time and resources into exploring how leaders could build those capacities.

When we face our biggest struggles, we fall into our default modes. But those default modes are not designed for today’s world. They don’t serve us. That’s why it’s critical to consciously adapt and make stress our ally.

You can’t fix the problem out there without cultivating calm in here.

So how do we do that?

First: Learn to notice when you’re in a triggered state.

It might show up as tightness. You might start speaking very quickly. You might feel tired, exhausted, or a pit in your stomach. Our body always gives us signals.

Emotional symptoms include anger, frustration, impatience, stress, a sense of blame, or feeling isolated. These are all signs that you’re triggered.

When you notice these signs, recognize that you’re experiencing what Daniel Goleman calls an "amygdala hijack." In that moment, your limbic, reptilian brain is on fire—and your ability to think clearly drops by 20 to 30%.

So just when you need clarity the most, you’re not equipped to find it.

The good news? You have a pressure release valve—and it’s your breath.

Close your eyes. Bring attention to your breath. From the moment we’re born to the moment we die, breathing is the first and last act of life. Yet most of our breaths are unconscious.

By consciously focusing on your breath, you can activate your parasympathetic nervous system—the “rest, digest, and recovery” system—and shift away from the adrenaline-fueled sympathetic system, which prepares us for physical threats, not emotional or psychological ones.

So breathe.

Here’s an approach I find really helpful. It’s a form of meditation created by our friends at Potential Project. It’s called ABCD:

A is for Anatomy: Sit up straight, maybe close your eyes, plant your feet.

B is for Breath: Focus on your breath—in and out.

C is for Count: Count each breath in and out. Try to reach 10.

D is for Distraction: If your mind wanders and starts thinking about the problem you need to fix again, just bring it back to the breath.

Give yourself the gift of 10 breaths. Notice what it cultivates for you—mentally, physically, and emotionally. That’s a really important move. We have to figure out a way to calm our circuits, which you’ll be on fire right now.

Second: Reconnect to your purpose.

From that place, I invite you to connect back to your purpose individually and as an organization, as for your business.

Once you’ve calmed your circuits—because they are likely on fire right now—come back to your purpose.

Individually and organizationally, ask: Why did you start this business? What service do you provide to your customers? How does it make their life better?

No matter how down the business may be, or how uncertain the future feels, remember: when you started, you didn’t have any of that certainty. The ‘why’ that made you start still exists.

Reconnect to that ‘why’. Help your employees reconnect to it. Remind your customers why you exist and how the benefits you provide make a difference.

As Viktor Frankl said: “Those who have a ‘why’ can survive any ‘how’.”

Third: Learn to consciously shift into resilient mindsets.

Anaïs Nin said it best: “We see the world as we are, not as it is.”

In moments of stress and volatility, we tend to fall into what I call anti-learning mindsets:

Victim: “Why is this happening to me?”

Scarcity: “There’s not enough.”

Fixed: “There’s nothing I can do.”

Expert: “I should know all the answers.”

Reactive: “I must act now to regain control.”

These mindsets won’t help you. Yet they’re the defaults our brains resort to when facing threats.

If you’ve done the first two steps—calmed your body and connected to your purpose—you can begin to ask five new questions that come from learning mindsets.

Abundance: What do I have now that I didn’t have before? What can I leverage today?

Agency: What’s one small action I can take right now?

Growth: What can I learn from this? How can I grow from this? How can I make this crisis an opportunity for me?

Creative: What’s the bigger ‘why’ I’m aligned with? How can I move toward that instead of trying to control everything?

Curiosity: Instead of pretending to be the expert, how can I engage my team and stay open to new solutions?

The ability to shift into these resilient mindsets is a critical move that adaptable, resilient leaders are able to make.

Fourth, if you are panicking right now, think about your employees.

They’re panicking even more. Regardless of where you are, you probably have more resources, more access to knowledge, and more agency than they do. So, it’s more important than ever to cultivate psychological safety with your team.

Connect with them individually. Be vulnerable. They don’t need you to be the perfect leader who has everything figured out. But they do need to be assured of your purpose, of what you’re doing, and how together you’ll navigate this.

Trust me—your people know when something is off. And they are with you. In small and medium businesses, that connection is one of your biggest strengths. Your people are connected to you. They’re not part of a 1,000- or 3,000-person organization where it feels like “just a job.” You can show that you care.

Finally, this is a time when you might feel the urge to work around the clock.

You might feel like you need to be in back-to-back meetings, calling customers, calling suppliers, moving the organization forward nonstop. But you can’t pour from an empty cup.

You have to continue investing in your own well-being—physically, mentally, spiritually. There’s a range of practices to support this, which we’ve included in the article linked in the show notes.

So, that’s the first part: cultivating your adaptability and resilience.

We have a program called Rewire that helps you do just that.

We’ll be launching a series where we meet every day for an hour—a webinar series to keep this front and center for you. We’re also launching a bootcamp where we’ll teach a set of skills to help you become more adaptable and resilient, alongside the other two key capabilities:

How to leverage the right data to get ahead and lead with insights.

How to truly sharpen your negotiation muscle.

We’ll cover all three capabilities in the upcoming bootcamp.

Now, let’s review the five key moves under adaptability and resilience:

Learn to notice when you’re in a triggered state and calm yourself.

Reconnect with your purpose.

Shift into resilient mindsets.

Connect with your team, be vulnerable, and cultivate psychological safety, and harness their potential and ideas.

Invest in wellbeing—for yourself and your team.

Leveraging Data and Analytics

Now, let’s shift to the second capability: leveraging data and analytics.

This is about using data to chart your path forward—to assess risk and decide the external actions you need to take.

Let’s break that down into two areas:

Demand Side: What You Sell

Most economists agree that because of these tariffs, prices will go up. Many businesses will try to pass those price increases forward. But how much of that you can pass on will depend on:

Your company’s size

The nature of your business

The contracts you have in place

So, first, assess your customers and how sensitive they are to price changes. If you sell directly to consumers, conduct a price sensitivity analysis. Look historically at what’s happened when you’ve raised prices. If you sell to customers who then sell to consumers, look at historical price changes and how your demand or volumes shifted.

Second, think about what your competitors are doing. How similar or different is your business model? Are they affected more or less by tariffs? Do they have mostly onshore or offshore supply chains? Understanding how they might be affected—and how that could be an advantage or disadvantage for you—is critical.

Third, segment your customers. Know who your most important ones are and where they fall in terms of profitability and impact.

Fourth, evaluate your contracts. What kind of price pass-through clauses do you have? What other terms can you leverage?

Combining internal data on:

Percentage of your costs increasing

Customer price sensitivity

Market intelligence on competitor actions

…will help you develop the right pricing response and confidently engage with your customers.

Supply Side: What You Buy

Similarly, you need to assess the impact on your supply chain.

First, look at all products and supplies you import. At a bill-of-materials level, identify which components and costs are most affected.

There’s a powerful tool I’ve used over my 20 years in consulting called Should-Cost Modeling. Many versions of this now exist through AI, allowing you to do this much faster.

For anything you buy, break it down into:

Material

Labor

Overhead

Identify which materials are most impacted and to what extent.

But don’t stop there. Even if you don’t buy raw materials directly—maybe you buy assembled parts—you need to analyze your suppliers’ supply chains too.

Look at Tier 2 and Tier 3 suppliers. Know that they will pass price increases to you, and you need to determine how much of that is acceptable—or not.

Negotiation Excellence

Finally, my friends, we know how much relationships matter in small and medium businesses. We pride ourselves on longstanding relationships. But in this moment, when so many things are shifting, it’s important to truly understand your options—especially if you’re facing a large supplier who might hold you hostage.

You need to be prepared with alternatives, even if not in the short term, at least in the midterm. You have to look internally at your data—costs, bill of materials, what you buy directly, and what your suppliers buy. How much of that is impacted based on tariffs and sourcing countries?

Then, look externally at potential options you might have. If you can do this on both the supplier side and the customer side—and do it quickly—you’ll be well-prepared to execute on the third capability: a bias for action and negotiation excellence.

Friends, whether you like it or not, running a business is incredibly hard. Know that this is coming to you. Over the next 4, 8, and 12 weeks, this is what you’re going to face:

Your largest customers will push back against accepting price increases.

Your largest suppliers will push forward their prices, even threatening supply disruptions.

Some customers—even those not directly impacted—will use this as an opportunity to ask for discounts. You may receive 1%, 5%, even 10% discount requests from customers citing their own viability concerns.

Negotiation excellence—how you respond—is going to be critical.

Now, think about these three critical events—or sets of negotiations—you’ll need to prepare for.

In the next four weeks, you have to get ahead and connect with your customers. These customer negotiations will require you to explain what’s happening and how prices are changing. You’ll need to prepare for these tough conversations, show the data you collected earlier, and do it from a grounded emotional and resilient mindset. You must demonstrate the value you’ve added. These first four weeks are crucial, as they will determine how much of the cost increase you can pass forward.

In the next eight weeks, the second set of negotiations will be with your suppliers. Many of them may already be reaching out, asking for price increases. One of my clients shared that their Vietnam supplier shut down their factory for two weeks and chose not to ship any product—because they weren’t sure they’d get paid or what they would have to pay upon arrival. They didn’t want to take a loss, so they paused everything.

You may face the same situation. Some suppliers might not pass along increases fairly or may simply stop deliveries. So, you need to be prepared and creative in exploring ways to collaborate. Also, ensure you have data to evaluate whether the price increases suppliers are passing along are actually fair.

Over the next 12 weeks, you need to step back and rethink the bigger picture—your supply chains.

Over the last 20–25 years, globalization was the name of the game. I remember reading The Lexus and the Olive Tree during business school at Chicago Booth. It was all about globalization—how work flows to countries best suited from a labor standpoint. Labor arbitrage was the trend.

Many of you have reconfigured your supply chains for efficiency—leveraging opportunities in Mexico, Canada, Vietnam, China, and other parts of Asia. You may have done final assembly here but moved most production abroad.

Many companies have moved there, looking for that operational excellence, that lever, because everybody was doing it and the barriers to trade were lowering. Our ability to buy things was getting better and much easier. But all of that is now up in the air.

If there’s one thing I’m 100% sure of, it’s that volatility, uncertainty, and complexity will continue to rise. We are entering a new era with less globalization. We’re already seeing the trend toward inshoring and nearshoring. Global supply chains will unravel, and you’ve got to get ahead of this.

There’s not a lot of nearshore or onshore capacity right now. You need to move fast to get ahead of the queue. Explore alternate countries. Redesign products to avoid expensive materials or switch to more accessible components. In some cases, you may even need to start making key parts in-house.

This is the time to think strategically. Regardless of how tariffs evolve, some will remain. And the steps you take now are critical.

So, three key moves—and capabilities—will determine how much of the $150 billion in economic headwinds you can offset or even capitalize on:

Adaptability and resilience—as leaders and as organizations

Data and analytics—to guide your decision-making in the fog of uncertainty

A bias for action and negotiation excellence—to equip yourself with the best tools of leading negotiators

At Happiness Squad, when I left McKinsey two and a half years ago, I made a commitment: to help democratize flourishing—to help individuals and leaders integrate the science of work, wellbeing, and human flourishing into how they live, work, and lead.

I fundamentally believe—based on research from Oxford, the World Economic Forum, and Harvard—that sustainable performance requires wellbeing. Businesses can’t flourish if their people don’t flourish.

And the reverse is also true: when businesses suffer, employees do too.

So today, as businesses face this unprecedented threat, we decided to partner with other companies and experts to augment our work around inner resilience—to help you become operationally resilient too.

So, my dear friends, we decided to partner with five of our leaders—leaders I had worked with in the past—to really help you make sure that you are in the best place. I knew that if we don’t help you as a business flourish and stay afloat, your employees are going to struggle even more. Our wellbeing as individuals is impacted the most when we lose employment.

Given that 50% of our economy is driven by you—50% of the growth is driven by you—we wanted to make sure we jumped into the arena to help give you the best chances to win. We’re going to focus on giving you the skills you need to be adaptable and resilient, but we’re not doing it alone.

I’m joined by five of my dear friends who have all committed to help you navigate this moment. One is Chuck White, the former Chief Procurement Officer of Schwab and Nationwide. Chuck is joined by five other leaders, including Tim Smith, who has been teaching pricing at DePaul for the last 20 years and runs a pricing consultancy firm.

We also have a leader who started a company called Amper Tech, which provides data and analytic support to companies. In addition, we’re bringing in experts like the former CPO of Kellogg, the former CPO of Mars, the Chief Procurement Officer of JBS, and one of the leading negotiation experts at Wharton. All of them have said yes.

I reached out to them over the last 24 to 48 hours, and they all agreed—in some shape or capacity—to be available to help you.

Together with them, we’re launching a set of resources that leaders, no matter your size or location, can access.

By the end of this week, you’ll have access to a white paper that you can download from our new website: tariffresponseteam.com.

We’ll also be hosting daily webinars that you can join. Both of these resources are completely free. We’ll keep connecting and sharing capabilities and tools you can use to navigate this crisis over the next 12 weeks.

In addition to those, we’re also launching three paid offerings you can leverage, depending on what you need:

One-on-one coaching and consultation with these experts.

A four-hour bootcamp each week that will cover negotiation excellence, data and analytics around sourcing and pricing, and adaptability and resilience. It’s designed to equip your leaders with the tools and skills they need to navigate this moment.

A mastermind group with 20 to 30 companies who want to explore this journey in a more deliberate and long-term way. These will be two-hour sessions once a week, where we’ll collectively harness the wisdom, capabilities, and expertise we each bring to the table.

Stay tuned for those—you’ll learn more in the coming weeks, and we’ll reach out to you personally.

If you know a small or medium business owner, I urge you to please forward this special podcast episode to them. We’ll be posting a lot of this on our Happiness Squad page on LinkedIn. Please share those posts with others.

Friends, we’re only going to get through this crisis together.

So join us at Happiness Squad—and alongside our trusted friends who have all stepped in to help our small and medium business owners not just survive, but truly thrive through this crisis.

Thank you, and I hope you have a wonderful day.