Small Business Outlook 2025
According to the US Chamber of Commerce, 33 million small companies in the USA employ nearly half of the American workforce and represent 43.5% of America’s GDP. They’re a major economic force, hampered in the last ten years via free trade, high interest rates, and high taxes — government-induced setbacks.
Times are changing however, and there is much room for optimism for your small business startup. The changes Donald Trump is making are greatly in favor of a resurgent small business sector across the US. In the next 3 months, we’ll have a better understanding of the effect of Trump’s economic changes.
As the chart below from the Chamber of Commerce suggests, independent businesses were feeling good about the return of Donald Trump.
Here’s Where SMBs Operate
According to Statista, just 34.7% of businesses in the United States founded between March 2013 to March 2023 were still operating in March 2023.
It seems like there’s always some new threat or disaster ready to befall anyone who invests in or starts a new small business. If it isn’t taxation, it’s higher interest rates and inflation, unlawfulness and property losses, natural disasters, regulations (CoC says 51% of small business owners state licensing, certification, and permit requirements make it harder to grow their business), or just a funding push by government into the large US multinational monopolies listed on the S&P. The corporate sector’s struggles to stay afloat meant governments were focused solely on their needs. Small businesses were sacrificed.
US Chamber of Commerce believes SMB’s biggest challenges are a lack of demand and lack of financing. However, business loan rates, loan qualification, finding investors, higher inflation and taxes are big stoppers for SMB growth. Of the last 4 months, consumer spending is down, and international travel to the US is down. Exports are up slightly, while imports are rocketing upward due to companies stocking up before the tariffs came into effect.
All of those indicators are likely reversing right now, and will decrease dramatically after April 2nd with the reciprocal tariff instatement.
Not surprisingly, new small business formation in the last 6 years has fallen although applications are up. It’s very risky with foreign business facing no tariffs while US companies face tariffs and resistance abroad.
However, with the Trump’s election, the US might be ready to turn it around and begin thriving again. However, the threat of foreign products created by almost slave-level wages will always be a threat. The biggest turnaround may occur with the repatriation of manufacturing to the US with automation and AI as added bonuses. This might provide an insurmountable advantage for US small businesses, who may have a lack of workers (e.g., agriculture or retail).
What’s more likely to pose a big threat is artificial intelligence which will replace human workers. The government still doesn’t have a plan to deal with that. Perhaps small business owners will discover the solution that problem.
Will the Tariffs Give US Small Companies the Protection Needed?
It appears somewhat that tariffs are doing that. Trump is:
- lowering income taxes
- reducing harmful, costly, time-wasting regulations
- preventing cheap imports from ruining their domestic market
Of course, a high USD and new tariff wars mean export markets have dried up. While the US economy makes this needed transition from government-funded activity to private enterprise-driven activity, small American businesses must endure a little more pain. In the end, if trade protections and lower taxes prevail, 2025 could be an outstanding year helping American companies launch into a very productive 5 year forecast period.
Positive Signals will Strengthen this Year
After TSMC and Hyundai announced big investments and plants in the USA, the improving economic theme is becoming more clear and confident. SMB owners are feeling more assured they won’t be wasting their precious money and time in a losing venture. Of course, there’s a way to go before Realtors, travel company owners and small manufacturers enjoy a strong customer base again.
Confidence inspires more creativity too, as there is less time spent worrying and more time focused on building the business and following paths to greater productivity. Trump seems interested in lowering interest rates however the tariffs will likely keep inflation up above 3%. Until US companies ramp up supply and production, prices of gasoline, food, and housing will remain high. He has the option of easing tariffs on specific items to free up some of this. Yet, he seems stuck on softwood lumber, steel, copper and aluminum tariffs so we might not see lower commodity prices for small business for sometime.
Economists are viewing the economic outlook with skepticism, seeing the economy eroding through 2025, uncovering a mild recession. However, these short-term adjustments will pass, and small business owners will see a paved path to profitability.
The Final Analysis on the SMB Outlook
This economic transition the US is undergoing isn’t over. Small businesses still haven’t felt the benefit of the Trump fixes. Over the next 3 months and 6 month forecast periods, we’re likely to see a flat economy for small businesses. For 2026 and the next 5 years however, the tables turn dramatically as SMBs enjoy protection from underpriced foreign producers such as Mexico and China.
More repatriation of manufacturing to the US means employment gains, income gains, and spin-off businesses. This might be the Golden era Trump is talking about. Of course, if Trump doesn’t maintain his resolve and can’t let SMBs get off the ground safely, it could irreparably harm SMB investor’s confidence.
Trump has his work cut out for him, with foreign countries threatening to retaliate, but now that he is focusing on their tariffs and non-tariffs obstructions to US goods, their actions look highly hypocritical.
It’s important to note that when goods production is solidified, this begins draw service business opportunities back into the US as well. It all takes time, so SMB investors and owner must see beyond 2025 to enjoy the rewards you deserve.
See more on predictions of the stock market including the NASDAQ, S&P, Dow Jones and Russell Small business index. See the latest projections of the US stock market.
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