By now, most people aren’t surprised to learn that small business in America is actually quite big.
You’ve heard the stats from the U.S. Small Business Administration that there are over 27 million small firms representing 99.7% of all U.S. employers. And I love reminding that these little powerhouses sign the front of half of all private sector paychecks and produce about the same percentage of our nation’s GDP. Pretty impressive.
But here’s a 21st century stat that begs the next question: With 94% of the world’s customers outside of our borders, what’s the impact of trade on small business? You might be surprised to learn that, according to the U.S. Department of Commerce, small businesses represent 98% of all U.S. exporters, producing about one-third of total export value. However, considering that all U.S. exporters number less than 300,000, it’s easy math to see that small exporters are a fraction of the total Main Street machine.
Armed with these numbers, casual observers can be forgiven for assuming that the level of disruption by the trade disputes being negotiated by the Trump administration only impacts about 1% of small businesses. But that’s not the whole small business trade story.
Over the past 30 years, the marketplace has experienced an unprecedented shift: Downsizing big businesses turned outsourcing into a best practice by vertically integrating small contractors into their operation and production systems, as well as their supply chains. Today, this trend continues to increase the number of small firms positioned as stakeholders in both the challenges and opportunities of their large customers, including trade. Consequently, when you add a couple hundred thousand small exporters to millions of small firms whose big customers have global customers, the trade dispute impact zone definitely overlays Main Street America.
Since the Trump administration’s attempts to reset our global trade deals have created much debate – and not a little anxiety – we wanted to know what our small business audience thought about all of this. In our weekly online poll earlier in the year, we asked, “Are you concerned that President Trump’s trade strategy will hurt your business?” Two-thirds said no and the other third varied between very to somewhat concerned. Prior to learning the information I revealed earlier, would those numbers have surprised you?
Recently, in a more specific follow-up trade impact question, we asked: “Have you been directly or indirectly impacted by the Trump trade/tariff strategy?” Here’s what we learned. Apparently the two-thirds group in the earlier poll knew their business and customers, as that same number reported, “We haven’t been impacted and don’t expect to be.” Of the remaining third, about 4% said they were already being directly impacted, and the rest, one-fifth, reported they were already being indirectly impacted through their customers.
You can now see that the small business sector becomes a direct and/or indirect collateral stakeholder during trade negotiation disruptions. My purpose here is not to pass judgment on President Trump’s strategy. Indeed, if he’s successful – even if the negotiating process is painful – as you now know, millions of small businesses stand to benefit from new, fairer trade deals.
But as the 24-7 news cycle hoses us down with trade negotiation “Breaking news,” and your head snaps around in response to the shiny object stock index fluctuations (or your 401K), just remember that there are only a few thousand U.S. big businesses buckled into this rollercoaster. But the small stakeholders holding on for dear life number in the millions.
Write this on a rock … Once again, nothing’s small about America’s small businesses. And the world is the better for it.