Why Utah’s small business owners could be hit especially hard by Trump’s proposed tariffs

Jesus Ruiz left his family’s restaurant to start his own, opening Señor Pollo Mexican Grill in Ogden in 2018.

Serving Sinaloa-style chicken, his business has since expanded to seven locations in Utah with another — his first out-of-state restaurant — planned for New York.

Despite that growth, he said the past year has been his most difficult. And experts say things are likely only going to get harder for him and other Utah small business owners if President-elect Donald Trump enacts the sweeping tariffs he’s proposed for the state’s largest trading partners.

Trump has said one of his first executive orders would be imposing an across-the-board 25% tax on all goods imported from Mexico and Canada, plus an additional 10% tariff on goods imported from China.

“When I heard it, obviously it’s a red light beeping in my head,” Ruiz said.

The potential import taxes would hit small businesses especially hard because they’re less prepared than larger corporations to weather economic storms, World Trade Center Utah COO David Carlebach said. They also don’t have the same resources to vary their supply chains.

Ruiz’s restaurants, for instance, use ingredients sourced directly from Mexico — peppers, herbs, spices, corn — as well as other foods he gets through a larger distributor, some of which he believes originate in Mexico, too.

If prices go up, the Mexican immigrant and Utah Hispanic Chamber of Commerce board member said he’ll likely need to start cutting employees’ hours and looking for different vendors.

“To start, a restaurant has really small margins of profit,” he said. If the tariffs are instituted, he added, and prices on goods go up, “that’s going to shrink my margin, and it will affect everything.”

Trump has said the proposed tariffs would stay in place until fentanyl and immigrants stop entering the country illegally. According to the Kem C. Gardner Policy Institute, Utah businesses imported about $4.9 billion in goods from Mexico, $3.1 billion from Canada and $2.7 billion from China in 2023.

Who foots the tariff bill?

Thomas Maloney, head of the University of Utah’s Department of Economics, said companies could — and likely will — pass price increases on to consumers. And while some may be able to start getting their products from other countries, he stressed that that’s not always the case.

Carlebach added that in cases where passing those potential increases on to consumers would make a company’s prices less competitive, the companies themselves are more likely to take the hit.

“Tariffs will impact both producers and consumers,” Carlebach said. “The extent to which one group or the other absorbs the impact is hard to know, and depends on how easily the producers or consumers can find substitutes or do without the product.”

Carlebach noted that he thinks it’s unlikely that Utah consumers will see significantly different price increases than other states, citing interstate trade.

But he believes the tariffs’ potential effects on small businesses in particular could hit Utah especially hard.

“Small businesses are important in Utah,” Carlebach said.

He explained that they provide about 45% of jobs in the state and “are a source of innovation and economic growth.”

That 45% translates to roughly 635,432 employee jobs, according to a 2023 profile from the U.S. Small Business Administration. The study also found that about 97% of Utah’s employers are small businesses, which accounts for about 71,136 positions.

Meanwhile, very large companies, categorized by the SBA as employing 500 people or more, employ about 20% of Utah’s workers, Carlebach said. Nationwide, that figure is about 40%.

“We believe that these larger companies are best positioned to handle new tariffs, with more resources to change their supply chains and the financial strength to withstand a loss of customers and revenue,” Carlebach said. “Given this, tariffs will potentially hurt businesses in Utah more than in the country overall.”

Can businesses do anything to prepare?

Many businesses in Utah have come to work regularly with China, Mexico and Canada, said Jonathan Freedman, the CEO of World Trade Center Utah.

“Now, this dynamic changes everything,” he said.

He said the situation shows why it’s important that businesses try to diversify their supply chains — something that he said has been a common conversation at World Trade Center Utah for years, especially when Trump initially took a “hawkish stance” on China during his first term.

Diversifying isn’t possible in every case, Maloney noted, and even when it is, there are likely reasons businesses chose certain countries to import goods from in the first place.

“Either that it was cheaper or better,” he said. “Presumably, the substitutes are not going to be perfect, and that’s going to sort of play into the effect on the market overall.”

Businesses that regularly import goods that don’t need to be used right away can also benefit by becoming a member of Utah’s foreign trade zone, Freedman said.

The zone is located in Salt Lake City, but is open to businesses located within a 60-mile radius, allowing them to defer any customs duty and import taxes until the goods leave the zone for consumption.

That can be a benefit, because as that inventory is stored in the zone, business owners can use the money they would have otherwise been charged immediately on other needs.

World Trade Center Utah became the grantee for the zone in October.

“We’re working with dozens of companies that are actively working on an application to participate,” Freedman said.

Why would Trump want these tariffs?

Maloney said tariffs are typically used for reasons like helping a certain country’s trading prospects grow — or as a political tool.

For example, he said, “if you thought that another country was producing clothing with child labor or forced labor, you might advocate for tariffs on those goods, or some restrictions on the imports of those goods, to deal with those injustices.”

Typically, he said, they’re not implemented so broadly.

“Normally, the kind of policy question you’d be trying to address would be more closely connected to the tariff,” Maloney said. “At least right now, the policy goal is a little bit distant from the specific industries we’re talking about. That strikes me as a somewhat more unusual use of the tool.”

What could these tariffs mean for Utah’s long term?

Carlebach said World Trade Center Utah hopes Trump’s talk of tariffs “is just an effective negotiating tactic.”

“However, if tariffs are to be used to address problems,” he said, “we hope they will be used for only a short time and lead to fairer and more global trade in the long run.”

He talked about potentially advocating for a carve-out of the tariffs for small businesses, and said World Trade Center Utah wants to hear business owners’ concerns and work with them.

Freedman added that the proposed tariffs — and the subsequent likelihood that businesses will instead want to buy products domestically — could lead to some U.S. companies growing and creating more jobs to fill that need.

“We want to be sure that we approach that in a very strategic way,” he said, “so that we’re growing the type of industries that are not a burden on our limited resources, such as water, transportation, housing.”

Maloney added that there’s a possibility that Utah and the rest of the U.S. could be faced with retaliatory tariffs, which would lead to a loss of trade as foreign importers diversify away from importing American goods.

“You should expect that to happen,” he said. “That’s a very common, I think, sequence of events in these kinds of negotiations, and so exporting firms ultimately are going to want to be mindful of that as well.”

Ruiz said despite the challenges he’s faced this year, and more that could be on the horizon, he believes Utah has a strong economy and a united community. He doesn’t think people need to be scared.

“We’re living in probably the best state in the U.S. to grow a family and start a business,” he said. “It’s like when COVID hit here in Utah; we weren’t fine, but we were fine compared to other places.”

He said that he hasn’t seen business owners’ concerns about the tariffs become a full-on discussion, but more “small talk.”

“They’re starting to think what to do, in case something happens, but still not doing much,” he said.

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