What does a second Trump term mean for local businesses?

A second Donald Trump administration will likely have an enormous impact on the area’s small-business owners — with both positive and negative potential effects. Here’s how Trump’s proposals for tariffs, taxes, regulatory rollbacks, and spending could affect small businesses in different industries.

Many provisions of the 2017 Tax Cuts and Jobs Act are set to expire by the end of 2025. This was a signature piece of legislation during the first Trump administration and the president-elect has vowed to either extend or make permanent most if not all of its provisions.

One of the biggest stipulations set to expire is the Qualified Business Income Tax deduction. This currently allows eligible owners of “pass-through” entities, like partnerships and S corporations, to deduct up to 20% of their company’s income before it “passes through” to their individual tax returns. Business owners running C corporations are also facing tax rates increasing from the current 21% to 28%.

Business owners taking advantage of the $29,400 standard deduction on their jointly filed individual tax returns are set to see that deduction cut in half. First-year deductions for research and development costs have already expired, and other incentives for investing in capital equipment — such as machinery, furniture, and technology — have also been cut back. Deductions related to estate taxes and state and local taxes are also on the table.

The fate of these provisions will have a direct impact on the taxes paid by small-business owners, which is among their most significant expenses.

In May, the Biden administration increased tariffs on certain products coming from China, including levies of up to 25% for steel, aluminum, batteries, critical minerals, and ship-to-shore cranes, and as much as 50% imposed on imported solar cells.

President-elect Trump has vowed to further increase all tariffs on imports from China to as much as 60%, plus levy a 10% tariff on all other imports.

The impact of tariffs has been heavily debated. Supporters say increasing tariffs protects pricing, creates and protects jobs, and provides more federal tax revenue. Opponents are concerned that tariffs may negatively impact competition by benefiting some industries over others, invite retaliatory action from those countries that are targeted, and — probably most importantly — increase prices and fuel inflation.

Small-business owners that either sell or buy products using imported materials would be impacted the most, and this applies across all industries.

Other companies that have been negatively impacted by foreign competitors undercutting their prices may find increased tariffs beneficial.

Certain industries — energy in particular — will benefit from a likely rollback of environmental regulations on drilling.

More significant for small businesses is a likely slowdown, if not reversal, of significant workplace policies that the Biden administration enacted this year.

For example, the Department of Labor issued new rules around worker classifications that required more employers to classify independent contractors as employees, and therefore incurring additional tax and benefit costs. The same department also revised its overtime rules so that, by the end of this year, eligible workers who are now making up to $58,656 will be entitled to overtime pay (at the beginning of the year this amount was $35,568).

The Equal Employment Opportunity Commission also issued new rules making employers more responsible for their employees’ behavior both in and out of the office, particularly if that behavior could create a hostile work environment.

Lawsuits have already been filed against these regulations, with more expected. The Trump administration is not expected to defend these regulations, so they could roll back to what they were before President Joe Biden took office.

In the EEOC, commission member terms are expiring each year, and, if the tendency in his first term sticks, the Trump administration would be unlikely to fill those seats, leaving the commission mostly toothless.

According to some economists, President-elect Trump’s spending and tax plans may increase our already high national debt by as much as $7.75 trillion. The U.S. national debt is now $35.9 trillion.

Increasing the country’s national debt in such a manner without meaningful changes to federal government revenues or expenditures will put more pressure on the Federal Reserve to expand our money supply, resulting in inflation and higher interest rates.

Federal Reserve Chair Jerome Powell has said he will not resign if Trump asks him to, and that Trump cannot fire him under the law.

Even with recent cuts, interest rates remain historically high and inflation is above the Fed’s target.

Since taking office Biden has seen a significant decline in small-business sentiment and optimism, as it’s been measured for over 50 years by the National Federation of Independent Businesses.

As happened during Trump’s first term, sentiment may rise to historically high levels. Small businesses employ more than half of the workers in this country and account for 44% of U.S. economic activity, according to the U.S. Small Business Administration. A more bullish sentiment could help increase investment and hiring.

Certain industries that dominate Philadelphia’s economy — such as health care and education — could see significant disruptions if President-elect Trump implements policies to end the federal Department of Education, to curb what he views as left-leaning tendencies at universities, and to rein in health-care pricing.

Other significant industries in the area, such as financial services, manufacturing, and construction, may see the benefits of more relaxed oversight, protective tariffs, and fewer workplace regulations.

But because Philadelphia’s mostly Democratic politicians opposed his candidacy, Trump will likely hold back federal support for local public infrastructure investment or other local initiatives in which small businesses participate.