Regulations and policies enacted during the Trump presidency have impacted small businesses. But because small businesses exist in a variety of industries and operate under different structures, the impacts range in significance and benefits or disadvantages. Below is a review of how several of the administration's changes have impacted small businesses across the country.
Trade War Tariffs
Since January 2018, Donald Trump has engaged in a trade war with China. As of October 2019, the United States imposes the following tariffs (taxes that must be paid by the importer):
- Steep tariffs on washing machines and solar panels
- A 25 percent tariff on approximately $250 billion on goods such as aluminum and steel, chemical and construction materials, textiles, tools, agricultural products, and commercial electronic equipment; the announced increase to 30 percent was scheduled to happen October 15 but has been delayed
- A 15 percent tariff on $110 billion of imports, which include clothing and back-to-school items
- A 15 percent tariff on another $156 billion of Chinese products is planned for December 15
The tariff on imports from China averages 21 percent; in 2017, the average tariff was around 3 percent.
Trump has increased tariffs on other foreign goods as well. Beginning October 2019, the United States will impose 25 percent tariffs on Spanish olive oil, French cheese, Scotch whiskey, mussels, wine, yogurt, and cashmere sweaters, among other items.
China and the European Union retaliated with significant tariffs on U.S. goods imported into their countries.
The tariffs' impact on small businesses vary greatly, both directly and indirectly, depending on the goods sold or used. For example, some small businesses that sell products that compete with the targeted imported goods might benefit from the tariffs, since their product becomes priced more competitively. Businesses that import the products with tariffs, of course, are negatively impacted by steep increases in costs. Businesses that indirectly rely on imported products also suffer from pass-through costs. For example, a bakery that uses pie tins likely will experience higher supply costs due to the increased tariffs on aluminum.
Small businesses have less flexibility than large companies in where they buy and manufacture their products.
In a recently released 2019 Small Business Confidence Survey over one-third (37 percent) of U.S. small businesses report costs have increased as a result of the tariffs. In response, half of business owners increased prices, resulting in declining sales for 46 percent of owners.
Tax Cuts and Jobs Act
At the end of 2017, Republicans in Congress passed the Tax Cuts and Jobs Act (TCJA), which brought tax reform to individuals and businesses. Significantly, the TCJA enacted a flat corporate tax rate of 21 percent.
According to a National Federation of Independent Business (NFIB) survey a year after the tax relief legislation, most small business owners believe the TCJA had a positive effect on the general economy. A little more than half (54 percent) reported the law positively affected their business, and 65 percent claimed the tax changes positively impacted their personal tax liability.
The U.S. Office of Advocacy monitors federal agency compliance with the Regulatory Flexibility Act (RFA), which resulted in changes to 18 specific rules in FY 2018 that reduced the regulatory burden for small business.
The regulatory changes resulted in $253.3 million in quantifiable regulatory compliance cost savings for small business in FY 2018. For example, the Department of Energy’s Ceiling Fan Light Rule implementation was delayed, giving small businesses more time to comply and saving them millions.
Association Health Plans
The Trump administration issued the association health plan (AHP) Final Rule in June 2018 to expand access to AHPs nationally. These regulations would allow unrelated small businesses to band together to access health insurance plans and offer group health insurance coverage not otherwise available to small employers and self-employed individuals. Working together as an association allows small businesses to reduce administrative costs, increase negotiating power with plan providers, access better healthcare networks, and offer more competitive benefits to employees. A federal court blocked the rule's implementation, but the administration has appealed the decision.
Expansion of Health Reimbursement Arrangements (HRAs)
A new Trump administration rule scheduled to take effect January 1, 2020, will allow employers to offer their employees Health Reimbursement Arrangements (HRAs) to buy individual market coverage. HRAs are employer-funded arrangements that workers use to pay for medical expenses.
This new rule will take about five years for its impact to fully be felt, but the administration believes the HRA expansion will help an estimated 800,000 small businesses by making it possible to fund coverage with less burden than a traditional group health plan.
Repeal of Dodd-Frank Rules
The Economic Growth, Regulatory Relief, and Consumer Protection Act passed Congress in early 2018. This legislation represented a partial rollback to the Dodd-Frank rules in place on the banking industry. The reform lifted some of the regulations on thousands of small to midsize banks. Banks with fewer than $250 billion in assets were freed from strict federal oversight. Proponents claim this will allow community banks to take more risks, resulting in increased access to capital for small businesses.
The long-term effect of the above regulations and policies remain uncertain, and many of these policies are contested or otherwise in flux. In the short-term, many of the laws enacted under the Trump presidency have already impacted small businesses in ways small and large.