Impact of Tariffs on Small Businesses and Local Economies: A Focus on Sustainable Development Goals

Report by the NLC Entrepreneurship & Economic Development Team

Introduction

Recent economic policies, including tariffs imposed on imported goods, have generated significant concern among city leaders and local economic stakeholders. This report examines the nature of tariffs, their effects on small businesses, and insights from city and entrepreneurship leaders. The analysis emphasizes alignment with the United Nations Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 11 (Sustainable Cities and Communities).

Understanding Tariffs

Tariffs are taxes imposed on imported products or materials used in manufacturing. These taxes contribute to federal revenue but also influence the cost structures of businesses, especially small enterprises that rely on imported goods.

Tariffs and Small Businesses: Challenges and Opportunities

Small businesses, which constitute over 99% of U.S. firms according to the U.S. Chamber of Commerce, are integral to cultural vitality, tourism, and economic development in cities. Tariffs affect these businesses in several ways:

1. Cost Increases: Tariffs raise the prices of imported goods and materials, forcing small businesses to either absorb costs, raise prices, or seek local alternatives.
2. Supply Chain Disruptions: Delays and uncertainties in supply chains impact inventory and production schedules.
3. Market Opportunities: Tariffs may provide domestic businesses with a competitive advantage by reducing foreign competition, encouraging reshoring and local sourcing.

These dynamics relate directly to SDG 8 by influencing economic growth and employment, and SDG 9 by affecting industrial innovation and infrastructure resilience.

Local Perspectives: City Leaders on Tariff Impacts

The National League of Cities (NLC) Entrepreneurship and Economic Development team interviewed local leaders actively engaged in supporting small businesses and entrepreneurial ecosystems. These leaders include:

• Jennifer Anderson, Consultant, City of Montgomery, AL
• Chrissanne Long, Owner of Maximize Digital, City of Lakeland, FL
• Brandy Guidry, Senior Planner of Economic Development, Houston-Galveston Council, City of Pearland, TX

Preparation Strategies for Tariff Impacts

• Economic development leaders emphasize foresight and support to help entrepreneurs navigate challenges and opportunities, aligning with SDG 8 and SDG 11.
• Some cities adopt a cautious approach, awaiting clearer economic signals before implementing specific measures.
• Exploration of domestic manufacturing and localized supply chains is underway to reduce dependence on imports, supporting SDG 9.

Current and Anticipated Impacts on Small Businesses

• Jennifer Anderson: Small businesses face rising costs for essential imported ingredients and materials, affecting pricing and business viability.
• Chrissanne Long: Economic uncertainty leads small businesses to reduce expenditures on services such as marketing to conserve capital.
• Brandy Guidry: Increased costs have prompted some layoffs and a shift toward domestic procurement, with greater reliance on loans and financing.

Supporting Small Businesses and Entrepreneurial Ecosystems

• Jennifer Anderson: Advocates for accessible, flexible learning opportunities (“microdosing the learning”) to help entrepreneurs stay informed without overwhelming their schedules, promoting SDG 4 (Quality Education) and SDG 8.
• Brandy Guidry: Emphasizes leveraging existing local networks and federal resources such as the Economic Development Administration to support supply chain localization and economic resilience, contributing to SDG 9 and SDG 11.

Recommendations for Cities

1. Develop targeted educational programs to demystify tariffs and economic policies for small business owners.
2. Encourage reshoring and support local manufacturing initiatives to strengthen supply chains.
3. Facilitate access to financing and government procurement opportunities for small businesses.
4. Promote collaboration among local governments, businesses, and federal agencies to enhance economic resilience.

Conclusion

Tariffs present both challenges and opportunities for small businesses and local economies. By aligning strategies with the Sustainable Development Goals, particularly SDG 8, SDG 9, and SDG 11, cities can foster inclusive economic growth, innovation, and sustainable communities.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

1. SDG 8: Decent Work and Economic Growth
   • The article focuses on small businesses, entrepreneurship, and local economic development, which are central to promoting sustained, inclusive, and sustainable economic growth and productive employment.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Discussion on tariffs affecting supply chains, reshoring manufacturing, and local production aligns with building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.
3. SDG 11: Sustainable Cities and Communities
   • The article highlights the role of city leaders and local governments in supporting small businesses and entrepreneurship ecosystems, contributing to making cities inclusive, safe, resilient, and sustainable.
4. SDG 17: Partnerships for the Goals
   • References to collaboration between city governments, local businesses, and federal agencies (e.g., Economic Development Administration) illustrate the importance of partnerships to achieve sustainable development.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

1. SDG 8 Targets
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation.
   • Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all.
2. SDG 9 Targets
   • Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product.
   • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies.
3. SDG 11 Targets
   • Target 11.3: Enhance inclusive and sustainable urbanization and capacity for participatory, integrated, and sustainable human settlement planning and management.
4. SDG 17 Targets
   • Target 17.17: Encourage and promote effective public, public-private, and civil society partnerships.

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

1. Indicators Related to SDG 8
   • Number and proportion of small businesses affected by tariffs and economic policies.
   • Access to financial services and loans by small businesses (e.g., uptick in traditional loans and lending).
   • Employment changes in small businesses, including layoffs due to tariff impacts.
2. Indicators Related to SDG 9
   • Percentage of firms diversifying supply chains and reshoring manufacturing.
   • Changes in domestic production capacity and supply chain resilience.
3. Indicators Related to SDG 11
   • Number of city-led initiatives supporting small businesses and entrepreneurship ecosystems.
   • Engagement levels of local governments with small businesses (e.g., training sessions, accessible learning programs).
4. Indicators Related to SDG 17
   • Number and effectiveness of partnerships between city governments, federal agencies, and local businesses.
   • Participation rates in collaborative programs like the City Inclusive Entrepreneurship Program.

4. Table: SDGs, Targets, and Indicators

Source: nlc.org