How Tariffs and Election Uncertainty Are Shaping Small Business in America

Host: Americans are headed to the polls tomorrow, and Wall Street is bracing for a possible shift in Washington. Public polls suggest Democrats could take control of the House, but the Senate is seen as a closer call. Analysts say a split government could mean gridlock in Washington, which markets have historically seen as more predictable. But for small business owners dealing with tariffs, higher prices and borrowing costs, the stakes are real. Joining me to break it down is Ben Johnston, Chief Operating Officer of Kapitus. Ben, thank you for joining us again, and thank you for being here in person.

Ben Johnston: Thank you for having me in person.

Host: You talk to a lot of small business owners every day. Going into tomorrow, what are they most worried about?

Ben Johnston: I think they are most worried about the same things voters going to the polls are worried about, and that is inflation and affordability. They are also really worried about the American consumer, because consumer spending makes up the majority of small business revenue. And they are worried about the price of oil and tariffs, because those make up a good amount of their expense base. They are really looking at how profitable they will be in the future.

Host: Tariffs have been a big issue this year. How are they showing up in costs and profit margins for small businesses right now?

Ben Johnston: Tariffs really depend on which industry you are in in terms of how impactful they are. Take manufacturing. On the one hand, tariffs might be providing some buffer for US manufacturers, a protectionist opportunity. On the other hand, they import a lot of component parts and raw materials. The tariffs on aluminium and steel right now are around 50%, and on component parts they can be 10 to 15%, so manufacturers are feeling it on both sides. In agriculture, farmers are paying 10 to 15% more for their equipment because of tariffs, and they are also facing retaliatory tariffs from countries that buy our soybeans and corn. In construction, there are tariffs on steel and aluminium, but also on wood, particle board and concrete imports. It is a broad range of industries all being impacted.

Host: If control of Congress changes, we could see a shift on tariffs, though the White House has the final say. What should small business owners realistically expect tomorrow?

Ben Johnston: Tariffs tend to be pretty sticky. I think it is unlikely the Democrats will take a supermajority of Congress that would let them override a presidential veto. The Trump administration has made it very clear that tariffs are an important part of its legacy, so it is hard to believe we will see material tariff changes. I do think you might see some rollbacks on Canadian tariffs, which have been punitive and have received a pretty negative reaction from a lot of Americans. But in general tariffs are sticky, and even Joe Biden did not really roll back the first tariffs that Donald Trump put in. So small businesses are bracing for the reality that tariffs are largely here to stay.

Host: Wall Street tends to like gridlock. Is a split government good or bad for Main Street?

Ben Johnston: Wall Street really does like gridlock, because it means the tax policies currently in place are likely to stay in place. For small businesses, what they want more than anything else is stability. There has been tremendous change over the last two years around oil prices and tariff policy, and that makes it really hard for small businesses to plan. They are hoping for some consistency. They generally believe they can build a business model around any set of policies. They just need to know what they are planning for.

Host: What are you seeing in demand for loans? With higher borrowing costs and another Fed hike possible in December, are small business owners signing up for more loans or holding back?

Ben Johnston: It is a little ironic that we are talking about all the challenges in the economy, and yet the economy continues to grow. As it has grown, there has been tremendous investment, especially around AI, data centres and the technology build out, and all of that is allowing small business America to grow. In October we actually saw our largest application month in history. We are seeing a large number of small businesses, many of them serving upmarket customers who are growing, looking for growth capital and investing into this economy, and we are optimistic that continues.

Host: How do oil prices and US trade policy with places like Europe and the UAE come back to small businesses, and how are they handling the steep increase in oil prices?

Ben Johnston: Higher oil prices and tariffs are certainly making European goods and goods from Asia and other parts of the world more expensive for Americans, there is no doubt. But it is important to remember that the United States is the largest oil and gas producer in the world. We continue to be a net exporter of oil and gas, and that is a tremendous strategic benefit. It gives a tailwind to US producers and small businesses, because they are able to access slightly less expensive oil and gas. Plus, the tariffs are providing some protection for US manufacturing, which is one reason you are seeing significant growth in US manufacturing. But I am sympathetic to those in Europe and abroad dealing with such high prices.

Host: Whatever happens tomorrow, what should small business owners be doing to prepare, for the end of the year and going into 2027?

Ben Johnston: We always tell our small business customers to keep their eye on their customer base. Know which portion of the market you are serving. The upper portion of the market is doing incredibly well right now, whereas the bottom half is struggling. So it is really important to know which customer base you are serving, how they are feeling about the economy and how their balance sheets are getting squeezed, and to position yourself for 2027 to meet the needs of that customer. The other thing we tell customers is to maintain strong financing relationships. You probably have a great relationship with your core bank, and that is really important. You should be talking to a couple of different banks, but you may also want to look outside the banking system to non bank lenders who can provide capital quickly, for growth or to weather any storms on the horizon.

Host: Ben, thank you for giving us a breakdown of what we are seeing with Main Street and small businesses in America.

Ben Johnston: Thank you so much for having me.