One second Donald Trump administration will likely have a huge impact on small business owners in the area – with both potential positive and negative effects. Here’s how Trump’s proposals for tariffs, taxes, regulatory cuts and spending could affect small businesses across industries.

tax

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

One of the biggest provisions set to expire is Qualified business tax deduction. This currently allows eligible owners of “pass-through” entities, such as partnerships and S corporations, to deduct up to 20% of their company’s income before it “rolls through” to their individual tax returns. Business owners who run C corporations also face rising tax rates from the current 21% to 28%.

Business owners who take 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 investment in capital equipment – such as machinery, furniture and technology – have also been reduced. Deductions related to property 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 are among their most important expenses.

rates

In May, the Biden administration increased rates on certain products originating in China, including duties of up to 25% on steel, aluminium, batteries, critical minerals and ship-to-shore cranes and up to 50% on imported solar cells.

President-elect Trump has promised to do just that to further increase all rates on imports from China up to 60%, plus charging a 10% tariff on all other imports.

The impact of tariffs has been widely debated. Proponents say raising tariffs protects prices, creates and protects jobs and provides more federal tax revenue. Opponents are concerned that the tariffs could negatively impact competition by benefiting some industries at the expense of others, invite retaliatory action by those targeted countries, and, perhaps most importantly, raise prices and fuel inflation.

Small business owners who sell or buy products using imported materials would be the most affected, and this applies across all industries.

Other companies that have been adversely affected by foreign competitors undercutting their prices may find the increased tariffs beneficial.

Regulations

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

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

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

The Equal Employment Opportunity Commission has also issued new rules making employers more accountable for the behavior of their employees both in and out of the office, especially 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 revert to what they were before the president Joe Biden took over the mandate.

In the EEOC, commission members’ terms expire each year, and if the trend from his first term holds, the Trump administration is unlikely to fill those seats, leaving the commission largely toothless.

Expenses

Conformable some economistsPresident-elect Trump’s spending and tax plans may increase our already high national debt by as much as $7.75 trillion. The US national debt is now $35.9 trillion.

Increasing the country’s national debt in such a way, without significant changes in federal government revenue or spending, will put more pressure on the Federal Reserve to expand our money supply, leading to inflation and higher interest rates.

Federal Reserve Chairman Jerome Powell he said he would 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.

Industry impact and sentiment

Since taking office, Biden has seen a significant decline in small business sentiment and optimism as measured for more than 50 years by the National Federation of Independent Business.

As it did during Trump’s first term, sentiment could rise to historically high levels. Small businesses employ more than half of the workers in this country and it represents 44% of US economic activityaccording to the US Small Business Administration. A more upbeat sentiment could help boost investment and employment.

Certain industries that dominate Philadelphia’s economy — such as health care and education — could see significant disruption if President-elect Trump enacts policies to end the federal Department of Education, curb what he sees as left-wing leanings at universities and to control health care prices.

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

But because mostly Democratic politicians in Philadelphia have opposed his candidacy, Trump is likely to withhold federal support for investments in local public infrastructure or other local initiatives involving small businesses.