Despite a more stable economy, small business owners are still feeling the impact of affordability issues, rising costs and evolving government policies into 2026.
In our first Small Business Update of the year, CO—Editor-in-Chief Janet Mulvey sits down with Neil Bradley, Vice President and Chief Policy Officer of the U.S. Chamber of Commerce, to discuss what entrepreneurs can expect this year. Here are some key trends to keep an eye on and how business owners can prepare to meet the challenges and opportunities ahead.
Economy is growing, but affordability and interest rates remain major concerns
According to Bradley, the overall U.S. economy will grow by just over 2% in 2025. While this is a good start, he noted that growth of at least 3% is needed to support higher wages and household incomes.
“We continue to get quarterly estimates of economic conditions…but they are widely divergent,” Bradley explained. “If you average all of that out… it’s a little bit better than 2%, but it’s not quite where we want it to be.”
Affordability remains a top concern for small businesses this year. Inflation has fallen from pandemic-era highs but remains hovering around 2.7%, above the Federal Reserve’s 2% target. High interest rates will continue to affect small and medium-sized enterprises considering borrowing in 2026. A rate cut could happen later this year, but the Fed is moving cautiously to avoid reigniting inflation, Bradley noted.
“The pace of interest rate cuts will likely slow in 2026,” he said. “I think [they’re] The status quo will probably stabilize for the first half of this year until we see a decline in the Fed’s interest rate target. ”
[Read more: 5 Small Business Inflation Busting Strategies]
Supreme Court ruling on tariffs could impact refunds
Tariffs have been on the minds of many small business owners since early last year. As of this writing, the Supreme Court is considering whether the current administration acted legally by using the International Emergency Economic Powers Act (IEEPA) to impose tariffs on the world.
If courts rule these tariffs illegal, some tariffs could be eliminated and affected companies could be entitled to refunds. However, Bradley noted that many tariffs, particularly those on products from China and metals such as steel and aluminum, fall under separate statutes and will not be affected.
The decline in interest rates is expected to slow down in 2026. [they’re] The status quo will probably stabilize for the first half of this year until we see a decline in the Fed’s interest rate target.
Neil Bradley, Vice President and Chief Policy Officer, U.S. Chamber of Commerce
[Read more: Tariff Impacts on Small Business]
Tax and immigration policies can affect small business finances and employment
Major tax reforms passed as part of the One Big Beautiful Bill Act of 2025 are now fully implemented. For small and medium-sized enterprises, this means greater clarity and flexibility regarding deductions, particularly for research and development costs and capital investments.
“Some of the more beneficial provisions are the clarity that research and development expenses, capital expenditures, new machinery, new equipment can be fully deducted,” Bradley said. “It has become much more scalable and easier for small businesses. [if] …You’re investing in your own company, so it just becomes easier to write it off from a tax standpoint. ”
Meanwhile, new entry restrictions, such as the $100,000 fee for H-1B visas and increased visitor requirements, are making it harder for small businesses to access legal foreign workers. Mr. Bradley noted that the net decline in overall immigration has had a significant impact on both worker availability and local economic activity.
“There are a lot of communities where the immigrant population is a significant portion of the consumer base, and all of a sudden we’re seeing that change,” he said. “It has a real impact on the local economy.”
AI adoption is accelerating, but federal regulation is lagging
AI continues to benefit small business innovation, and Bradley is optimistic about its productivity-enhancing potential. Although state regulations vary and there is currently no federal policy regarding this technology, there are many AI resources available to small businesses, including the U.S. Chamber of Commerce’s upcoming virtual AI training program, Small Business Basics, in partnership with Google.
“When you talk to small businesses, they’re just coming in and figuring out how to leverage it. [AI] “So I think there’s a huge opportunity for small businesses to increase productivity in 2026, which will ultimately support rapid economic growth,” Bradley said.
[Read more: Google and the U.S. Chamber Join Forces to Help 40,000 Small Businesses Learn AI]
CO— aims to provide inspiration from leading and respected experts. However, before making any business decisions, you should consult a professional who can advise you based on your personal circumstances.
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