U.S. trade policy continues to hurt Arizona small businesses

Robert Krol

Submitted photo/InsideSources

The president’s decision not to extend the U.S.-Mexico-Canada Trade Agreement is another example of the kind of policy choices that raise trade uncertainty. The combination of higher tariffs and uncertainty surrounding future tariff rates has been particularly harmful to small- and medium-size businesses, which generate half of all jobs in the country. If trade policy continues down this path, it will hamper economic growth.”

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OPINION — It has been more than a year since President Trump initiated his tariff program to revive the U.S. economy. The on-again, off-again nature of the policy approach and the successful legal challenges to his tariffs have raised trade-policy uncertainty to high levels.   

The president’s decision not to extend the U.S.-Mexico-Canada Trade Agreement is another example of the kind of policy choices that raise trade uncertainty. The combination of higher tariffs and uncertainty surrounding future tariff rates has been particularly harmful to small- and medium-size businesses, including those in Arizona, which generate half of all jobs in the country. If trade policy continues down this path, it will hamper economic growth. 

Using U.S. Census data, research has shown that 97% of U.S. importers are small- and medium-size businesses. In terms of value, these businesses account for one-third of all imports. These figures indicate that trade policy can have a significant effect on these businesses. 

Despite the president’s claim that foreign exporters are paying the tariffs, research shows that at least 90% of U.S. tariffs are paid by importers or consumers. The tariff bill has tripled over the last year for these smaller businesses compared with the year before Trump became president. This results in a tariff bill that is $25,000 higher per month for the average small- and medium-size businesses. 

Given the importance of these businesses to the economy, how are they doing? A recent Joint Economic Committee Minority report used data from the QuickBooks Small Business Index to examine how the smallest, most vulnerable businesses — employing 10 or fewer employees — have fared since the tariffs were imposed.  The study found 292,000 jobs were lost in 2025. That figure is 4 1/2 times larger than job losses during the 2020 pandemic year. There have been 13 consecutive months of job losses at these small businesses since Trump came into office. 

Reviving manufacturing has been a primary objective of the president’s trade policies. Employment in small manufacturing firms is down by almost 39,000 jobs since April 2025. Manufacturing revenues are down 11%. Other sectors have similar performance. Now, to be fair, the president’s policies have not been in place very long. However, administration officials talk glowingly about the economy.  If you are a small business, I suspect you have a different perspective on the economy.  

Tariffs affect business two ways. First, businesses that import face higher operating costs, lowering profits. Small businesses have smaller profit margins compared to large corporations, making it harder to absorb these costs. Those businesses that operate in highly competitive markets will find it difficult to pass these costs on by raising customer prices. Some of these businesses will fail because of the tariffs.  

Second, uncertainty about future tariff rates continues to evolve. Operating any business, especially smaller businesses, is risky even in the best of times. The tariff uncertainty adds to the risk of running a business. Not knowing what your costs will be causes businesses to hold off investing or hiring more workers.  

Entrepreneurs are less likely to start a new business. There is value in waiting.  The uncertainty of future tariff rates acts as a drag on the economy. 

The president’s decision to not extend the successful U.S.-Mexico-Canada Agreement, which established the trading rules for these countries, will harm all three countries. New negotiations will likely drag on for years, creating uncertainty with two of our major trading partners. 

This is important for small- and medium-size businesses. These enterprises import a substantial amount of products from Canada and Mexico. U.S. Census data shows that 30% of imports from Canada are by small- and medium-size businesses.  The share of imports from Mexico is about 20%. If the new trade agreement with Canada and Mexico includes new tariffs on imports into the United States, small- and medium-size firms will take a big hit. 

The president’s trade policies with the rest of the world have increased costs for businesses and consumers. His on-again, off-again negotiation style creates uncertainty for businesses of all sizes, which puts a brake on investment and hiring. As a first step, the president can stabilize those costs and reduce uncertainty by quickly renewing the successful U.S. -Mexico-Canada trade agreement. 

Robert Krol is an emeritus professor of economics at California State University-Northridge. He wrote this for InsideSources.com. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.