Trump's Tariffs & Tax Cuts Impact on Small Businesses

President Trump’s second term will impact millions of small businesses. The policies he proposed on the campaign trail are coming to life, and some of them are having immediate impacts. These are some of the things small business owners may want to monitor. © David Yonke/The News-Messenger via Imagn Content Services, LLC

Trump is a fan of using tariffs to tax other countries. This move can help domestic manufacturers by making their products more affordable relative to international competitors.

Tariffing other countries to protect U.S. companies isn’t new. While he was in the Oval Office, President Biden increased the tariff on EVs from 25% to 100% last year. It’s one of the main reasons BYD hasn’t taken more of Tesla’s market share. © Cheryl Evans/The Republic / USA TODAY NETWORK via Imagn Images

While tariffs can protect domestic manufacturers, they also result in higher prices for some products and services. Companies often raise their prices based on the tariff rate. For instance, a company that gets a 25% tariff will increase its prices by 25%.

Those extra costs can lead to additional expenses for small businesses that bring in materials from overseas. © Tyler Orsburn/News Herald / USA TODAY NETWORK via Imagn Images

Trump’s policy on deportations aims to increase national security, but it can hurt some small businesses that have become dependent on undocumented workers. One South Dakota dairy farmer warned that food would run out in two days if mass deportations were put in place. © GREG LOVETT/PALM BEACH POST / USA TODAY NETWORK via Imagn Images

Many small businesses benefited from the 2017 Tax Cuts and Job Act. This policy allowed eligible small businesses to deduct up to 20% of their business income.

President Trump aims to continue this policy and promised more tax cuts during his speech to Davos’ elite. © Mandi Wright / USA TODAY NETWORK via Imagn Images

Trump’s policies and statements suggest that income taxes will be reduced and tariffs will replace it as a revenue source. Any small business can benefit from keeping a higher percentage of its income, but those gains can be offset by high tariffs.

Domestic manufacturers have plenty to gain since they aren’t as impacted by tariffs. However, the degree to which tariffs go up and tax breaks increase remains to be seen. © Barbara Gauntt/Clarion Ledger / USA TODAY NETWORK via Imagn Images

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Trump’s Tariffs & Tax Cuts Impact on Small Businesses