Economy primed to grow in 2025 but new policies could hamper business

CHARLESTON, S.C. (WCSC) – As the new year rings in, business owners, economists and researchers are bracing for the unknown changes in economic policies sure to come when a new administration takes over in Washington.

The economy was a top issue on the campaign trail, with President-elect Donald Trump taking shots at the Biden Administration’s handling of the COVID-19 economic rebound marred by skyrocketing inflation and some of the highest interest rates in the last 20 years.

Since peaking at more than 9% in 2022, inflation has come down and the Federal Reserve has responded by lowering interest rates to stimulate controlled economic growth. Americans are ending 2024 with an inflation rate between 2 to 3% and interest rates below 5%, setting up businesses for growth in the new year.

Those numbers are still far off from the virtually non-existent inflation and interest rates seen at the end of 2020 when Trump left office, but it does suggest the economy is recovering well from the impact of the pandemic and wars abroad and is primed to start 2025 on a solid note.

“I think that small business owners are optimistic,” Frank Knapp, the president and CEO of the South Carolina Small Business Chamber of Commerce, says. “But they’re very wary of what’s going to happen with the new administration because the new ministration can take actions that would severely impact small businesses.”

Knapp’s organization is anxiously waiting for the details on two of Trump’s favorite talking points that could cause major shifts in the economic forecast: tariffs and mass deportation.

He says Trump’s insistence on tariffs could hamper any business that relies on parts or products made in other countries, especially China. Since small businesses have tight margins, such costs get passed on to the customer.

“Unfortunately, small businesses aren’t always in a position to completely pass on [to customers] whatever the additional cost is for these products made in other countries,” Knapp says. “They may have to turn to other ways of minimizing their expenses. Maybe it’s cutting employee hours, benefits, or positions altogether.”

The other policy Knapp’s team is watching centers on a campaign promise to conduct the largest mass deportation the country has ever seen. Knapp says the problem is small businesses rely on those workers.

“Up to 13 million undocumented people in this country are working for small businesses,” Knapp says. “They’re working in agriculture and in construction, and in hotels and restaurants, and landscaping and caring for elderly. Those are all small businesses that are going to be negatively impacted if there’s this mass deportation.”

The Pew Research Center estimates there are 95,000 unauthorized workers in South Carolina. If all those workers are deported, Knapp says that’s going to be a huge problem for the economy.

“We are simply not producing the number of workers we need,” Knapp says. “Ninety percent of all the undocumented workers in this country are of working age. Small businesses are going to either have to just simply go out of business or they won’t be able to produce the goods and services that the consumers are demanding,”

If a mass deportation does end up hurting small businesses, Knapp says he’s working on a potential class-action lawsuit that could help businesses recuperate losses.

“If nothing changes in Washington, after Jan. 21, small businesses are going to be fine. They’re really going to move forward, but if there’s major national policy shifts, small businesses are going to be very concerned,” Knapp says.

Trump’s inauguration date is set for Jan. 20.

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