The New York Fed dropped a report this week that surprised exactly no one running a business: American companies and consumers are the ones paying for tariffs, not foreign exporters. The Tax Foundation puts it at $1,300 per household in 2026.

If you’re a business owner, the question isn’t whether tariffs affect you. It’s whether your operation is lean enough to absorb the hit.

The Real Problem Isn’t the Tariff

When external costs rise — tariffs, inflation, supply chain disruptions — the businesses that break first aren’t the ones with the smallest revenue. They’re the ones with the most waste baked into their operations.

Here’s the math:

  • Business A: 25% margin, 15% operational waste → 10% real margin. A 5% tariff on inputs drops them to 5%.
  • Business B: 25% margin, 3% waste → 22% real margin. Same tariff leaves them at 17%.

Business B doesn’t survive because it’s bigger. It survives because it’s leaner. That’s the core principle of Lean Six Sigma applied to economic shocks.

Three Levers That Actually Work

1. Map Your Value Stream

Most business owners can’t tell you where their waste is because they’ve never mapped it. Take your core process — order to delivery — and look for:

  • Wait time between steps (where work sits idle)
  • Rework and corrections
  • Unnecessary movement of materials or information

In my work applying Queuing Theory to business operations, wait time accounts for 60-80% of total process time in most service operations. That’s cash sitting on the table.

2. Cut Your Work in Progress

This one feels counterintuitive: accepting less simultaneous work actually speeds up delivery. Little’s Law — a foundational concept in Queuing Theory — shows:

Cycle Time = WIP ÷ Throughput

If you’re running 20 projects at once and completing 5 per week, each takes 4 weeks. Drop to 10 and cycle time falls to 2 weeks — without hiring anyone. Less WIP means faster cash conversion, which means more resilience when external costs spike.

3. Automate the Repetitive

In 2026, AI and automation tools are accessible to businesses of any size. If you’re still doing manual scheduling, spreadsheet quotes, and text message follow-ups, you’re paying the most expensive rate in the world: your own time.

Systems that handle repetitive operations aren’t a luxury. They’re the equivalent of removing a 20% internal tariff on your most valuable resource.

What Tariffs Actually Teach Us

Tariffs come and go. Administrations change. Trade policies shift. What doesn’t change is the physics of business: lean operations survive shocks; bloated ones don’t.

The NY Fed didn’t say anything that Taiichi Ohno — the father of the Toyota Production System — didn’t know in the 1950s: costs you can’t control externally must be offset by efficiency you control internally.

The next crisis — tariff, recession, or technological disruption — won’t ask if you’re ready. Start cutting waste today.

JJ Andrade is a Business Performance Engineer, author of the “Combining Lean Six Sigma and Queuing Theory” series, and founder of JJ Andrade LLC. He specializes in applied queuing theory and operational performance engineering for businesses.