It seems unlikely that small businesses will see tariff relief any time soon, given the Trump Administration’s aggressive response to the Supreme Court’s decision, in which he promised to maintain or increase tariffs on importers of foreign goods using other sections of the Trade Act of 1974. The President promised to immediately implement a 15% tariff on all countries using Section 122 of the Act and committed to use Section 301 of the Act to open investigations into the unfair trading practices of other nations, which could result in additional tariffs. The end result is continued volatility in U.S. trade policy without material relief from tariffs in the short term.

Given the President’s commitment to maintain the use of tariffs as a point of leverage in his negotiations with foreign countries, and his willingness to reach for novel interpretations of existing trade law, it seems unlikely that material tariff relief for small businesses is coming soon. Section 122 of the Act allows for tariffs of up to 15% to be imposed for up to 150 days in order to correct “fundamental international payment problems.” This gives the President the ability to increase tariffs beyond the 10% target stated immediately after the decision and provides leverage in future trade negotiations. Section 301 would likely take longer to implement as its required trade investigations take time, but these tariffs would not be restricted to a 150-day time limit, making them more durable and sustaining. We believe that the President remains as committed to his tariff strategy today as he was when he entered office, and that small businesses are unlikely to see a significant drop in tariff rates during the Trump Administration without an act of Congress that defies the President’s wishes.

Here are key things to consider moving forward:

U.S. competitiveness and domestic manufacturing

We believe that the U.S. is in the early stages of a manufacturing resurgence, some of which can be attributed to current U.S. tariff policy. While tariffs are often a challenge for U.S. manufacturers who import component parts and assemble these parts in the U.S., over time, we expect more and more of these components to be manufactured domestically, leading to a growing U.S. manufacturing base. At Kapitus we have seen strong growth in the number of small manufacturers who have applied for and received capital over the past year and are optimistic that this trend will continue as domestic manufacturers increasingly adopt AI and robotic technologies to make their operations more efficient, and benefit from the impacts of aggressive tariff policies and a weaker dollar to provide protection from foreign goods.

Supply chain volatility

Unfortunately, we believe that this decision actually introduces greater uncertainty and instability for small businesses. While it is possible that some tariffs on select goods from select countries could fall in the short term, these reductions are likely to be short-lived and might even rise over time. It is also possible that the U.S. government could be forced to repay some or all of the approximately $170 billion in tariff revenue paid by U.S. importers over the past year. However, there are likely to be years of court battles over this issue before any checks are written, leaving small businesses with little potential upside in the near-term.

Refunds

Refunds for small businesses definitely could happen. There is currently a robust market for buying and selling tariff refund receipts. However, any refunds are likely to happen years in the future after significant legal battles are resolved, so retailers shouldn’t expect a cash windfall any time soon. Most likely, consumers will get nothing back. However, it is possible that retailers who receive significant refunds may decide to price their products more aggressively in the future in order to take market share, fueled by the windfall they received from tariff refunds. We think refunds are unlikely in the short-term as the Trump Administration is likely to fight any demands for refunds in court, and these cases are likely to take years to resolve.

Small businesses’ access to capital

Continued volatility in tariff policy makes it difficult for lenders to properly assess the future cashflow of a business that is seeking capital. As a result, lenders may be forced to lend more conservatively, reducing overall offer size and increasing price to compensate for the increased risk presented by the uncertainty in cost of goods and demand.

What small business owners can be doing right now to protect themselves from future policy volatility

Small businesses should be keeping a close eye on changes to tariffs on the specific goods and countries that they import from. If a drop in tariffs does in fact occur, small businesses should have the capital lined up to finance the purchase of critical inventory at discounted prices. However, small businesses should also be prepared to continue managing their business without significant tariff relief and should explore opportunities to source more goods domestically. For small manufacturers, exploring the possibility of vertical integration, or the production of more component parts in house, may prove a valuable advancement of the business model that pays dividends for years.

LEARN MORE: