The current Administration is using tariffs, subsidies, and farm relief payments as part of its tools in renegotiating the terms of NAFTA, China trade policies and other international trade agreements. Tariffs or the taxes imposed on imported goods or services are getting the most public attention because it affects hundreds of items used by U.S. producers.
To determine the impact of the policy changes to the small business sector, the National Federation of Independent Business (NFIB) surveyed a random sample of its member base receiving the following responses:
About 5 percent of small business owners said that they had been favorably impacted probably due to targeted relief payments or subsidies to offset higher costs. However, almost 30 percent said that they underwent a “somewhat negative impact,” and about 10 percent said they experienced a “significant negative impact” on their business.
Most of the negative impacts were caused by the higher costs to cover higher tariffs imposed on imports into the U.S.as well as the tariffs imposed on U.S. exports.
Retaliatory tariffs imposed on U.S exports by other countries have also messed up markets and reduced sales as those tariffs add to the cost of U.S goods in other countries.
The study of the impact per industry shows that the least impact was experienced by companies in various service sectors such as finance, real estate, insurance, professional and non-professional services with only 10 to 20 percent reporting a negative impact. Companies in agriculture were most impacted with 64 percent reporting a negative impact. The negative impact was also experienced by fifty-seven percent in the wholesale trades, followed by 41 percent in construction and manufacturing.
These “negative impacts” include a reduced supply of needed inputs, rising costs of inputs, increase in selling prices to cover higher tariff costs, and extra time and effort needed to reorganize “supply chains” negatively affected by the tariffs.
The result shows that changes in trade policy and retaliatory measures result in uncertainty for many which could contribute to slower economic growth.
While it’s an impossible task to identify all the specific impacts with 6 million employer firms and tens of millions of single-person firms all in the group, the NFIB trade survey presents a general understanding of how recent changes in trade policy affected small businesses.