The 2024 U.S. presidential election has concluded, with Donald Trump once again taking office. His administration is set to bring specific priorities and policies that could shape the landscape for small business owners and aspiring entrepreneurs. Whether you're already running a small business or considering launching a side hustle, understanding what lies ahead under the new Trump administration can help you prepare to take advantage of new opportunities.
Here’s an overview of key areas likely to affect small businesses, including tax policy, energy priorities, funding access, and regulatory changes.
- Lower Taxes for Small Businesses
- Focus on Deregulation
- Energy Policies Favoring Traditional Fossil Fuels
- Expanded Opportunity Zones
- Potential Tariff Policies Affecting Product Costs
- Immigration Policy Impact on Workforce Availability
- Potential Focus on Domestic Manufacturing and Buy American Incentives
We will now take a look at each one of these factors and explain what we believe will be the impact to small businesses and startups.
1. Tax Cuts and Extensions of the 2017 Tax Cuts and Jobs Act (TCJA)
One of the Trump administration's primary commitments involves extending and expanding key provisions of the 2017 TCJA. This includes maintaining lower individual income tax rates and making business tax benefits, such as immediate expensing for equipment (bonus depreciation), more permanent. Additionally, Trump has proposed lowering the corporate tax rate from 21% to 15%.
Benefits for Entrepreneurs
- Lower Tax Rates: Small businesses that file as pass-through entities will continue benefiting from the lower individual income tax rates, which helps them keep more revenue in the business.
- Bonus Depreciation: With permanent bonus depreciation, businesses can immediately deduct the cost of investments in equipment and other tangible assets, rather than depreciating these over time. This is particularly beneficial for startups needing equipment or technology investments.
Why This Matters
Keeping tax rates low, along with expanded deductions, can significantly ease cash flow constraints for new businesses. For aspiring entrepreneurs, this setup may make transitioning from a side hustle to a full-time business more feasible.
2. Deregulation Focus to Simplify Business Operations
The Trump administration has reiterated a commitment to deregulating several industries, especially healthcare, finance, and manufacturing. This focus aims to eliminate or reduce regulations that many businesses perceive as obstacles.
How Deregulation Could Benefit Small Businesses
For example, reducing compliance requirements could lower operational costs for small firms and allow quicker market entry for new businesses, particularly in manufacturing and healthcare. Entrepreneurs in industries with typically high regulatory demands may find fewer bureaucratic hurdles, translating to lower startup costs and a more streamlined launch process.
Why This Matters
Deregulation can benefit entrepreneurs in highly regulated fields by reducing the time and cost associated with meeting compliance standards, giving small businesses a faster, less complicated path to start operations. Additionally, degregulation (or a committment to not increase regulation) could open up new investment and business opportunities. For example, Trump has voiced plans to dismantle what he considers and overly regulated crypto market and will establish a "Crypto Sandbox" in the United States.
3. Energy Policy Favoring Fossil Fuels Over Green Initiatives
Trump's campaign has promised to revitalize traditional energy sources by expanding oil, coal, and natural gas production. This direction contrasts sharply with the green initiatives of previous administrations, instead supporting fossil fuel industries and aiming for lower energy prices.
Potential Impacts on Small Businesses
For businesses dependent on affordable and stable energy costs, such as manufacturing, transportation, and logistics, this could provide financial predictability and lower operational costs and an expansion of business opportunites in the sector. However, for businesses in renewable energy or those looking to adopt eco-friendly practices, federal support may be minimal, which could shift their focus to private funding sources and consumer-driven demand.
Why This Matters
Stable energy costs benefit energy-intensive small businesses, providing predictability and lower costs. However, green-oriented businesses may need to seek alternative funding sources as federal incentives for sustainability might not be prioritized
4. Tariff Policies and Domestic Manufacturing Focus
Continuing with his "America First" agenda, Trump has proposed increased tariffs on imported goods, especially from China. This includes reciprocal tariffs on countries with trade barriers against the U.S., as well as a potential 10–20% tariff on imported goods.
How Tariffs Could Affect Entrepreneurs
Entrepreneurs relying on imported products may face higher input costs, which could impact profitability or necessitate price increases. On the other hand, businesses that source or manufacture goods domestically may find a competitive edge in the market and benefit from consumer support for American-made products.
Why This Matters
While domestic manufacturing-focused policies support U.S.-based supply chains, small businesses relying on affordable imported goods might face higher costs and will need to weigh these impacts carefully. This could greatly impact those who rely on cheaply made foreign goods, especially from China, such as dropshippers and sellers on marketplaces such as Amazon, Ebay, Etsy, Temu, and so forth.
5. Changes to Immigration Policy and Workforce Availability
Trump's stance on immigration, including restrictions on certain work permits/visas and his plans for mass deportations, could impact industries that rely on cheap immigrant (and illegal) labor. Sectors like agriculture, construction, and hospitality may find it harder to source skilled or affordable labor under stricter immigration policies.
Potential Impacts on Small Business Owners
For small business owners in labor-intensive fields, limited access to affordable labor could require adapting through increased wages, training programs, or investments in automation. Entrepreneurs in tech and highly skilled sectors might also face challenges if the visa process becomes more restrictive for specialized foreign talent.
Why This Matters
Access to affordable labor is a critical factor for many small businesses. If immigration policies tighten and mass deportations are approved, businesses may face higher operating costs (due to the lack of cheap labor) as well as potential labor shortages, unless the legal immigration system is also reformed to allow for a speedier legal immigration process.
6. Incentives for Operating in Opportunity Zones
The Trump administration previously supported Opportunity Zones, which offer tax benefits for businesses that invest in economically distressed areas. Trump has indicated that he may expand the program to encourage further investment and business development in these areas.
How This Helps Entrepreneurs
Aspiring business owners targeting underserved communities may benefit from tax incentives that lower capital gains tax burdens. These benefits could free up funds for reinvestment in business operations or expansion, making Opportunity Zones particularly attractive for entrepreneurs looking to start in low-cost locations.
Why This Matters
Operating in Opportunity Zones provides valuable tax breaks for businesses and helps stimulate economic growth in underserved areas. This can be an advantage for entrepreneurs interested in opening physical locations or providing services in these communities
Final Thoughts: Navigating Trump’s Economic Vision as an Entrepreneur
With President-Elect Trump’s return, small business owners and aspiring entrepreneurs can expect a mix of benefits and challenges. Lower taxes, deregulation, and a focus on fossil fuels may create a favorable environment for some industries, while higher tariffs and stricter immigration policies could impact others.
Small businesses can leverage these changes by planning strategically: taking advantage of tax incentives, assessing the benefits of Opportunity Zones, and adapting to changing labor dynamics. By staying informed and responsive to policy shifts, entrepreneurs can position themselves to thrive in the coming years.
