The nation is now gearing up for another Trump term, and his policies will likely have a significant impact on small businesses. Critical areas like tax cuts and deregulation, which were central to his first term, are expected to take the spotlight once again. Here’s how Trump’s economic policy could affect small businesses.

The Tax Cuts and Jobs Act of Trump’s Previous Term

During his initial term, Trump implemented the Tax Cuts and Jobs Act (TCJA), significantly easing business tax obligations. He has committed to prolonging key aspects of this legislation scheduled to lapse in 2025, particularly the Qualified Business Income (QBI) deduction, which allows owners of pass-through entities to deduct up to 20% of their qualified business income from taxable income.

Additionally, Trump has advocated for reducing the corporate tax rate from 21% to 20%, with a proposed 15% rate for companies that manufacture their products domestically. He has also suggested eliminating taxes on tips and overtime pay.

According to the National Federation of Independent Business, a nonpartisan advocacy organization, the TCJA was positively received by small business owners, evidenced by solid backing for the QBI deduction. Extending these tax incentives would help spur growth and innovation among small businesses across the United States.

Tariffs

Trump’s campaign focused on strengthening the economy and increasing Americans’ purchasing power. One key proposal involves imposing tariffs ranging from 10% to 20% on all imports entering the United States and a 60% tariff on Chinese goods. Trump would likely have the authority to enact these tariffs, though Congress might attempt to limit their scope.

Here’s how these tariffs could impact small businesses:

• Opportunities for U.S.-Manufactured Products: Small businesses that manufacture and sell products entirely within the U.S. could gain a competitive edge. According to the Tax Foundation, a nonpartisan organization, such companies may see increased demand for their products as imported goods become pricier.
• Challenges for Import-Dependent Companies: Companies that rely on imported parts, materials, or products will need to decide whether to absorb the additional costs or pass them on to consumers, which could affect sales.
• Risk of Retaliatory Tariffs: Imposing tariffs can lead other countries to respond with their own tariffs, making it more challenging for American businesses to export their goods and compete in global markets.

Deregulation

Deregulation has been a key focus for Trump, who has pledged to reduce government red tape and reverse specific policies introduced during Biden’s administration. However, scaling back regulations is no simple task. While Trump introduced significantly fewer new regulations during his first term than past presidents, many of these initiatives faced legal challenges and were overturned.

For his second term, Trump has emphasized that deregulation will remain a priority. Small businesses in highly regulated industries like energy, technology, and finance may see increased operational efficiency and growth opportunities.

Access to Small Business Financing

Small Business Administration (SBA) lending rose during Trump’s first two years in office. A simplified loan process and enhanced initiatives like the 7(a) Loan Program made securing funding easier for small businesses. During his second term, Trump may advocate for expanded SBA loan programs, potentially providing entrepreneurs greater access to the funds necessary for business expansion or startups.