As the August 1 deadline for trade deals or sweeping tariffs on countries around the world nears, and the Trump administration advises the market “not to panic,” wholesalers and distributors are warning of a massive hit to a sector at the heart of the U.S. economy.

Wholesalers and distributors account for approximately one-third of gross domestic product across all of the goods and services they handle, according to Eric Hoplin, president & CEO of the National Association of Wholesaler-Distributors, and he says the $8.2 trillion industry will suffer the biggest blow from President Trump’s trade policy.

Companies in this segment range in size from small family businesses to Fortune 500 companies, with the smaller firms expected to face greater financial pressures.

The top five wholesale product categories include healthcare goods, food, clothing, building materials, and technology, but the goods and services handled range much more widely, from oil and gas to industrial products, motor vehicles and auto parts, commercial equipment and supplies, office products and paper merchants, furniture and home furnishings, chemicals and plastics, apparel, alcoholic beverages, hardware, plumbing and heating, agriculture products, and a wide range of durable goods and consumer products.

As companies held off making major orders given the trade uncertainty, the wholesale-distribution supply chain faces increased obstacles. “We have long lead times with our supply chains,” said Hoplin, explaining it typically operates a few months ahead of retail. “Companies are looking for certainty and do not want to get caught holding inventory. … Chemicals going into prescription drugs, medicinal supplies, syringes, clothing, and foods can be impacted as a result of companies waiting,” he said.

According to Hoplin, the inventory that was pulled forward earlier in 2025 to avoid tariff deadlines is running low.

One example Hoplin gave was artificial Christmas trees. One of the largest importers has seen a 60% decrease in orders from brick-and-mortar retailers and local hardware stores. “The pausing of buying decisions for the holidays can lead to a shortage of some items, and other products will be more expensive,” Hoplin said. “We are close to the point of no return with holiday items,” he added.

Search for new markets for goods underway

Hoplin said he has met with Canadian counterparts to discuss their strategy. While the U.S. recently reached trade deal frameworks with the EU and Japan, it has not made an agreement with Canada, though many products are still protected within the terms of the North American trade deal signed during Trump’s first term, USMCA.

“They are reaching out all over the globe to find other markets for their goods,” Hoplin said. “At the end of this, you will see different supply lines. The U.S. may not be the first client country anymore. Countries are building relationships with other countries like they have never done before, ” he said, citing Europe as a big market for Canadian companies.

“The wholesale trade sector is facing over one-half of the U.S. economy tariff exposure, at almost $50 billion,” said J.D. Ewing, CEO of office furniture company COE Distributing, citing a study produced by JPMorgan analysts. “The tariffs will impact the smaller distributors more heavily,” he added.

COE Distributing expanded its supply chain out of China over the past decade to Vietnam, Malaysia, and Taiwan. The company also sources from Mexico and Canada, with some manufacturing in the U.S.

Ewing told CNBC in addition to the lack of manufacturing capacity in the U.S., the biggest issue is cost.

“U.S. furniture manufacturing is considered the highest tier, called A or A+,” he said. “That means there is a significant cost structure attached, and companies need to charge a premium to cover those costs. Our products are in the middle product price range. It would be difficult for us to maintain our business at those costs,” he added.

The lack of clarity on tariffs has left his firm in a holding pattern. “Making plans can be difficult,” Ewing said. But he stressed that the company is focusing on what it can control, and that is China manufacturing. In the first third of the calendar year, production from China dropped from 15% to 3%.

High tariff rates will lead to ‘inevitable’ price increases

Logistics experts tell CNBC that even with the new tariff deals being announced, such as Japan and the EU at 15%, the rates should still be considered high.

Maia Benson, chief business officer for customs and logistics platform FlavorCloud, used a knife from Japan as an example of impact from the layering impact of tariffs. A $240 chef’s knife can increase in cost to as high as $280 for distributors and wholesales as a result of national emergency act tariffs already enacted by Trump, new customs fees, and the additional tariff rates for each country will add to the cost.

A survey by the National Association of Wholesaler-Distributors found 62% of distributors expect their cost of goods sold to rise by 10% or more in 2025. Other research shows a similar outlook for higher costs and prices. A recent International Data Corporation survey found 65% of wholesalers citing tariffs and related geo-economic concerns as the top threat to their business. Wholesale distribution is a relatively high volume but low margin business that is incredibly sensitive to input costs, according to Simon Ellis, group vice president at IDC.

“Wholesale distributors will not be able to manage tariffs without price increases,” Ellis said. “Many have been able to delay those increases by cycling through older, less costly inventory, but that cannot last and increases are inevitable,” he added.

Price increases and tariffs have been cited on earnings calls.

Procter & Gamble CFO Andre Schulten told analysts during its third quarter conference call that there will be mid-single-digit price increases affecting about a quarter of P&G’s items during the first quarter of fiscal 2026 due to tariffs and innovation.

But many companies inside the economy remain dependent on the specifics of country by country tariff announcements for their price planning. “Most companies tell us that the precise level of price increases remain unclear until they have the specifics on new trade deals and can assess the precise impact,” Ellis said.