How Global Instability Is Reshaping Los Angeles's Supply Chain—and Small Business Survival

Maria Hernández didn't expect her wholesale textile operation on Santee Alley to become a case study in geopolitical risk management. Yet that's exactly what's happened over the past eighteen months as her sourcing strategy has been upended by unrest in Venezuela, Pakistan's military strikes on Afghanistan, and escalating U.S.-Iran tensions that threaten the Strait of Hormuz—a chokepoint controlling nearly a third of global oil shipments.

"My costs have gone up 22 percent since January," Hernández said, reflecting the reality facing dozens of small business owners across Los Angeles County. Raw material prices have spiked as shipping routes become less predictable, and port congestion in Long Beach—already struggling with a 15 percent increase in vessel wait times—has forced many entrepreneurs to pay premium rates or accept longer lead times.

The cascading effects are visible across Los Angeles's entrepreneurial ecosystem. Boutique retailers along Melrose Avenue report customers balking at price increases tied to foreign exchange volatility and tariff uncertainty. Tech startups in Santa Monica find themselves competing for talent while navigating visa delays tied to heightened geopolitical scrutiny. Meanwhile, food importers in the Fashion District are scrambling: with Iran tensions threatening to disrupt oil markets, fuel surcharges from freight forwarders have become the third-largest operational cost after labor and rent.

The Los Angeles Business Journal's June survey of 340 small business owners found that 67 percent cited international instability as their top operational concern—outpacing inflation and labor shortages for the first time since 2022. Nearly half have begun diversifying suppliers or nearshoring production to Mexico, a practical but costly pivot.

Some entrepreneurs are finding opportunity in the chaos. Import consultants and logistics firms have seen demand surge. Sustainability-focused local manufacturers are attracting clients eager to reduce exposure to global supply chains. And a handful of Downtown LA-based apparel makers report renewed interest from brands willing to pay premium prices for shorter lead times and reduced geopolitical risk.

"The winners in this environment are companies that can pivot quickly," said one Long Beach trade specialist, speaking on background. "That advantage belongs to small, locally-connected businesses—if they can afford the transition costs."

For many, they can't. The Small Business Administration reported a 12 percent decline in new business registrations across Los Angeles County in the second quarter of 2026, with supply chain uncertainty cited as a primary factor. The challenge now is whether City Hall and regional economic development agencies can do more to support entrepreneurs navigating a world where Venezuelan aftershocks and Middle East negotiations suddenly matter to the bottom line on Santee Alley.

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