President Donald Trump is making good on his campaign promise to renegotiate trade deals. And, he has the strong support of both small business buyers and sellers.
Since taking office, Trump has moved swiftly to withdraw the U.S. from two international free trade deals: the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA). BizBuySell recently surveyed over 700 small business owners and buyers to gauge the small business community’s support for various aspects of Trump’s presidency. The survey reveals a significant majority of both small business owners and prospective buyers stand behind Trump’s trade decisions. Because both groups play a pivotal role in worldwide trade, it’s important to examine why they support Trump’s trade stance -- and what impact Trump’s proposed trade plans could have on small business buyers and sellers.
Trump and trade: The background behind dismantling deals
On the campaign trail, Trump railed against both established and proposed international trade agreements, including the TPP and NAFTA, arguing that these measures diminished U.S. economic standing and disenfranchised its workers. As president, Trump immediately began dismantling these agreements, signing an executive order to withdraw from the TPP on his first day in office. Signed by participating countries in February 2016, the TPP would have created an economic alliance of 12 nations that border the Pacific Ocean. In supporting the agreement, President Barack Obama argued that it would empower the U.S. economy amid mounting Chinese economic growth. But, Trump called the TPP a “disaster,” using strong words to confirm his opposition to the deal.
After withdrawing from the TPP, Trump moved on to NAFTA, a trade agreement between the U.S., Mexico and Canada that was enacted in 1994. NAFTA’s main objective is to ease North American trading by substantially eliminating tariffs between the three countries. During his campaign, Trump continuously referred to NAFTA as “the worst trade deal” -- one that incentivized companies to relocate production to Mexico and displace U.S.-based workers. Now, Trump’s White House has indicated that it will begin revising the agreement later this year. In the past, Trump has discussed imposing tariffs on Mexico to fund the construction of his planned wall across the U.S.-Mexico border.
Why small business buyers and sellers support Trump’s plans
According to BizBuySell’s survey, most owners (66 percent) and prospective buyers (63 percent) are in favor of Trump’s approach to renegotiating global trade. In fact, more than one-fifth of individuals planning to buy a business within the next two years indicate they’ll be more likely to buy given Trump’s trade renegotiations. Here’s the thought process of a few supporting respondents from the survey:
NAFTA benefits other countries over the U.S.: As one respondent put it, “The NAFTA treaty is so slanted in favor of both Canada and Mexico that we need to eliminate the deal.” While economists might be split on the issue, Trump argues that the U.S. has a trade deficit with its NAFTA partners, which has resulted in the U.S. importing more goods from Canada and Mexico than the countries importing from the U.S.
Tariffs enable fair trade: Another respondent highlighted the need for “fair” over “free” trade, and argued that “Tariffs can help balance out trade ‘partners’ who have subsidized or illegal advantages. This is why tariffs were part of the Constitution.”
Trump’s business acumen: Trump’s decades of business experience is another reason the small business community supports his approach to trade. In the view of one respondent, “[Trump] is a businessman. I believe it takes one to know that to effectively negotiate trade deals, you need to do what is in the best interest of America's businesses.”
Trump’s new vision for trade -- and the small business stake
Trump’s move away from established trade deals is accompanied by a new vision for trade. While the strategy is still in its infancy -- there are currently only around 300 words of text about it on the White House website -- it promises “trade deals that work for all Americans” through the appointment of “the toughest and smartest . . . negotiators” who will push “for fair but tough trade deals.” Although the White House plan has yet to provide specifics, Trump has indicated that he’s in favor of establishing bilateral trade deals with certain nations, such as Japan and the U.K., instead of multilateral deals like the TPP and NAFTA. Despite Trump’s outward confidence, there is skepticism around how effectively this rigidly nationalistic approach to trade will work in practice.
However Trump’s international trade plan plays out, small businesses have a massive stake in the outcome. As 2013 U.S. Census Bureau findings reveal, small businesses comprise 97.7 percent of U.S. goods exporters and the value of exports coming from small businesses has grown from 28.9 percent in 2006 to 33.5 percent. Clearly, small businesses play a critical role in both domestic and international trade. But, if Trump imposes tariffs on economic competitors like China, this could increase the price of raw materials for small businesses. On the other hand, the imposition of tariffs on companies that import goods from international sources could force those businesses to raise consumer prices, making pricing more competitive for small businesses that don’t rely on foreign imports. International trade is a subject of uncertainty, but at least for the moment, small businesses are standing behind Trump.