More than half of small- and midsized- business owners in the US expect tariffs enacted by the Trump Administration to increase their operating costs, and more than 40 percent predict sales to decline, according to a new study.
While many of these owners don’t foresee major near-term changes because of the trade levies, a significant number predict rising inflation and a weakening US dollar. Many owners said they would likely increase prices, cut staff, and curtail business investments, according to research by Zoe B. Cullen and Ebehi Iyoha, assistant professors at Harvard Business School, and MIT Professor David Atkin.
For the working paper "Navigating Choppy Waters: How US Trade Policy Uncertainty Affect Small Businesses," the team analyzed the responses of leaders of 4,400 small- and medium-sized enterprises in the US and Canada who were surveyed on the Alignable networking platform in late March. The answers, gathered just before the US government announced tariffs on imports from countries worldwide, illustrate how companies from across a wide range of industries plan to cope with the duties.
The analysis reveals how deeply small businesses—most employing fewer than 500 people—are connected to the international economy. To be sure, the analysis suggests that some owners might be open to shifting to domestic suppliers, also known as reshoring:
About 20 percent of owners said they could immediately switch to domestic suppliers, and 35 percent estimated that reshoring would raise costs by no more than 20 percent.
Another 20 percent of owners said that shifting would be impossible or prohibitively expensive.
While the authors caution against applying the findings more broadly, small businesses in the US contribute more than 40 percent of the country’s economic output. Although small businesses generally employ fewer than 500 people, these firms have also propelled job creation in recent years.
Additional findings:
About 80 percent of respondents don't expect that the US government will support them through tariff-related changes.
Most respondents say they wouldn't be able to secure price reductions from suppliers abroad.
Image by Yoav Aziz for Unsplash.
