December 17, 2024
Black businesses could possibly see their growth hindered by Trump’s economic agenda on many fronts.
A sizeable 24% of Black-owned businesses operate in sectors dependent on imports affected by tariffs. Due to the projected tariffs the Donald Trump administration proposes, the annual revenue loss for those businesses could range from $1.8 billion to $3.6 billion.
That estimate is based on an analysis by William Michael Cunningham, an economist and CEO of Creative Investment Research. And it’s just one possible game-changing example of what challenges Black businesses could face once Trump begins his second term as president.
Though the impact of the new policies is unclear, a group of Black economists agrees that they could harm Black businesses struggling to compete against larger and financially stronger non-diverse peers.
Trump’s proposed policies could raise the cost of consumer goods, increase government debt, and raise the cost of living for people making under $100,000. There is also uncertainty about how his leadership will impact the Federal Reserve’s ability to control interest rates.
TRUMP’S AGENDA MET WITH CONCERN FROM BLACK ECONOMISTS
BLACK ENTERPRISE interviewed several Black economists to understand what the next four years could look like under the proposed policies in several areas. The Trump administration has suggested cutting the corporate tax rate from 15% to 21%. Though some entrepreneurs may embrace the reduction, other observers fear Trump’s protectionist trade approach and pledge to erase the Affordable Care Act, creating costly, systemic problems that could prevail over the tax benefit.
On the trade front, Trump has advocated 10% to 20% tariffs on all imports and 60% to 100% tariffs on goods from China. He declared the policies would produce new jobs and help the U.S. manufacturers. However, the National Retail Federation estimates the tariffs would cost consumers $78 billion annually.
Another concern is that Trump’s broader economic plan could raise the federal deficit, which this report estimates could range from $3 trillion to $7 trillion.
PROPOSALS COULD CREATE A “MIXED BAG” FOR BLACK BUSINESSES
Cunningham added that Trump’s policies on protectionism, tax reform, and social spending cuts could create a mixed bag for Black businesses. Tariffs often increase import prices for larger white-owned businesses reliant on international supply chains.
“Black firms may suffer if customers reduce discretionary spending due to inflationary pressures caused by counter-tariffs or supply chain disruptions.”
Romie Tribble, Jr., an economics professor at Spelman College, says Black businesses in transportation/warehousing, retail trade, construction, food services, wholesale trade, manufacturing, and agriculture are more import and export-dependent.
He says imposing a 25% tariff on goods from Canada and Mexico and a 10% tariff on China would be difficult for Black businesses to pass on to customers. The higher cost of goods could yield significant reductions in customer demand and Black business employment, meaning those firms might have to partially or fully absorb the tariffs.
“Losing customers or employees is undesirable since both could cause a sizeable increase in Black business failure or a decline in profits required for reinvestment to either sustain or expand the business,” said Tribble, who is also secretary of the National Economic Association, a network of Black economists, other professionals, and graduate students.
Furthermore, there may be environmental and global setbacks for Black businesses. Cunningham says Trump’s planned abandonment of the Paris Climate Accord signals reduced federal commitment to addressing climate change. As such, Cunningham says this unduly affects low-income and minority communities that are often situated in areas more vulnerable to environmental hazards.
“Black-owned businesses tied to sustainable practices or clean energy industries may lose federal support, hindering growth in these sectors.”
WHAT FUTURE POLICIES COULD MEAN FOR BLACK WOMEN ENTREPRENEURS
Black women-owned businesses, among the fastest-growing firms in recent years, could be negatively impacted by Trump’s tariff policies.
Rhonda Vonshay Sharpe, president of the Women’s Institute for Science, Equity and Race (WISER), told BLACK ENTERPRISE that nearly 4% of Black women who report being self-employed work in nail salons, over 6% in retail, 10% in beauty salons, and over 15% in healthcare this year. These industries import consumer goods, with a large portion coming from China, Vietnam, Europe, and Korea.
She said entrepreneurs in the beauty, health, and retail industries—or any industry that relies heavily on imported goods—should expect the tariffs to increase the cost of inventory. She hopes those costs will be passed on to consumers, making beauty salon services more expensive.
“If these businesses have low cash reserves or are unable to secure loans to offset the increased cost, they are more vulnerable to closure,” Sharpe says. “This will have consequences for wealth accumulation, economic mobility, and fiscal insecurity.”
WISER, which Sharpe founded in 2016, is a nonprofit research think tank that centers on women of color. She is a past president of the National Economic Association.
Another concern is how Trump’s proposed sizeable social spending cuts, including potential funding changes on programs like the Supplemental Nutrition Assistance Program (SNAP), the Department of Education, and Medicare, could impact low-income households.
Sharpe shared that in 2024, Black women comprised 30% of single low-income mothers. “Any cuts in social spending will have precarious consequences for these families and their communities that are already under-resourced.”
POSSIBLE OPPORTUNITIES PROPOSALS COULD BRING
On the upside, Black individuals and entrepreneurs who invest in the stock market might benefit from Trump’s economic agenda. It’s been reported that U.S. stocks endured a bullish run after Trump’s recent election. Much of the upturn was purportedly fueled by expectations that Trump’s policies could help different industries perform stronger, benefitting from tax cuts, deregulation, and centering on domestic energy production. Technology, energy, and financial sectors have seen a stock uptick.
Further, Cunningham says many Black-owned businesses primarily operate at a local to regional scale, including retail, food services, and community-driven industries. He says less competition from international players due to tariffs could provide these businesses with a more competitive landscape.
He shared that protectionist policies often boost consumer interest in domestically sourced goods and services, a trend that could favor small Black businesses catering to local needs.
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