Markets dislike uncertainty. America experienced more than its fair share of uncertainty on the election when Donald Trump shocked the pundits by upending their polls and predictions and winning the presidential election. Not surprisingly the markets quaked; as the results came in, Dow futures plunged and at one point were down almost 800 points. They later rebounded and have since appeared to stabilize.
But what will be the longer-term business effects of Donald Trump, the nation’s forty-fifth President? What impacts will he have, not just on markets as a whole, but on individual small businesses? We have taken a look at his various proposals and statements, and have identified six areas that are likely to change for small business owners under a Trump administration:
From the first days of Trump’s candidacy, he has remained focused on increased border security and immigration control. Taken at face value, his plans to deport millions of undocumented immigrants could have devastating consequences on the workforce of small businesses that rely, knowingly or not, on undocumented immigrants. Trump not only plans to crack down on undocumented immigrants, but he also plans to tighten restrictions on foreign workers legally allowed into the country via visa programs, commonly known as the H-1B visa. The impact of this is potentially mixed, as on the downside it has the potential to contribute to a labor shortage of high tech works, but on the upside, could help stem losses among American workers who are being replaced by H-1B visa workers.
ADVICE: Small business owners that rely on immigrant works should make sure they are fully in compliance with applicable laws, just in case.
Trump has repeatedly railed against the loss of U.S. manufacturing jobs and put forward protectionist policies to retaliate against nations that have benefited from America’s industrial decline. Specifically, he has threatened to enact new tariffs against China and Mexico, at levels of 45% and 35% respectively based on their alleged anti-free trade policies. In line with this stance, Trump has denounced free trade agreements as disastrous. He plans to reject the Trans-Pacific Partnership, and even alter or rollback decades-old agreements, like the North America Free Trade Agreement. Trump has also threatened to penalize American companies that continue to transfer jobs overseas. Whether he can get these enacted with a still pro-trade Republican Congress, this attitude and resultant policies would negatively affect businesses that are engaged in direct international trade. But in this interconnected world, finding a business that would be unaffected by international trade disruptions would be hard.
ADVICE: Find ways to minimize supply chain and customer disruptions if your business is dependent on disfavored countries.
For years, small businesses and their trade associations have rallied against what they see as excessive regulation. Under a Trump presidency, relief may be in sight. Some think tanks estimate that new regulations enacted under Obama since 2009 have cost US businesses at least $108 billion dollars a year. Trump has promised sweeping reforms and reductions of federal regulation in almost every facet of American life, including business. Whether such reductions are good is outside of this review, but for a small business impacted by significant regulatory compliance costs, this may be good news. However, if your small business depends on regulatory requirements, you might be a bit concerned.
ADVICE: Review what regulations impact your small business and figure out the opportunity and risks and act accordingly.
4) Health Care
Consistent with Congressional Republicans, Trump is opposed to the Affordable Care Act and plans to repeal the measure. Healthcare issues would likely fall to states, which under Trump may be able to purchase and sell insurances across state borders for the first time. Trump supports granting individuals access to federal health savings accounts and allowing monthly premiums to be fully deductible at tax time. Costs of healthcare under Obamacare have been a significant issue for many small businesses and if Trump is able to reduce the burdens on small businesses, it will be seen as a positive.
ADVICE: Calculate your costs for providing health care to employees and be ready to adapt to any changes quickly. Good health care benefits can be a powerful incentive for hiring new employees.
Trump has proposed reducing the income tax on all companies to fifteen percent, including pass-through tax entities like most LLC’s and S-corporations. However, this may not impact small businesses too much as many small business owners already find themselves paying 15% or lower tax rates. Trump is also expected to propose a simplification of personal income tax rates, which if enacted would mean small businesses owners would have more money to put back into their business or to start a new business.
ADVICE: If you pay over 15% taxation as a small business owner, you should be ready to work with your tax adviser.
6) Federal Contracts
Democrats may resist Trump on most fronts, but there is one area where they agree with him. Both Trump and Democrats want to pass legislation to make it easier for small businesses to win federal contracts.