Despite a more stable economy, small business owners are still feeling the impact of affordability issues, rising costs, and evolving government policies heading into 2026.\u00a0<\/p>\n
In the first\u00a0Small Business Update<\/a> of the year, CO\u2014 Editor-in-Chief Jeanette Mulvey spoke with\u00a0Neil Bradley<\/a>, EVP and Chief Policy Officer at the U.S. Chamber of Commerce, to discuss what entrepreneurs can expect this year. Here are some key trends to watch for and how business owners can prepare to navigate the challenges and opportunities ahead.<\/p>\n The economy is growing, but affordability and interest rates are still major concerns<\/p>\n According to Bradley, the U.S. economy grew just above 2% overall in 2025. While this is a good start, he noted that at least 3% growth is needed to support higher wages and household incomes.<\/p>\n \u201cWe keep getting these quarterly estimates about how the economy is doing \u2026 but they diverge wildly,\u201d Bradley explained. \u201cWhen you average all of those things out, it\u2019s \u2026 a little better than 2%, but not where we want to be.\u201d<\/p>\n Affordability is still a top concern for small businesses this year. Though inflation has cooled from its pandemic-era highs, it\u2019s still hovering around 2.7%\u2014above the Federal Reserve\u2019s 2% target. High interest rates will also continue to affect small businesses looking to borrow in 2026. Rate cuts may come later in the year, but Bradley noted that the Federal Reserve is moving cautiously to avoid reigniting inflation.<\/p>\n \u201cWe\u2019re going to see a slower reduction in interest rates in 2026,\u201d he said. \u201cI think [they\u2019re] going to hold stable where they are, maybe for the first half of the year before we see \u2026 declines in the Federal Reserve interest rate targets.\u201d<\/p>\n [Read more:\u00a05 Small Business Inflation Busting Strategies<\/a>]\u00a0<\/p>\n Supreme Court decision on tariffs could impact refunds<\/p>\n Tariffs have been on many small business owners\u2019 minds since early last year. At the time of writing, the Supreme Court is reviewing whether the current administration acted lawfully by using the International Emergency Economic Powers Act (IEEPA) to impose global tariffs.<\/p>\n If the Court rules these tariffs unlawful, some could be eliminated, and affected businesses may be entitled to refunds. However, Bradley noted that many tariffs\u2014especially those on goods from China or metals like steel and aluminum\u2014fall under different statutes and wouldn\u2019t be affected.<\/p>\n We\u2019re going to see a slower reduction in interest rates in 2026. I think [they\u2019re] going to hold stable where they are, maybe for the first half of the year before we see \u2026 declines in the Federal Reserve interest rate targets.<\/p>\n Neil Bradley, EVP and Chief Policy Officer, U.S. Chamber of Commerce<\/p>\n [Read more:\u00a0Tariff Impacts on Small Business<\/a>]\u00a0<\/p>\n Tax and immigration policies could affect SMB finances and hiring<\/p>\n The major tax reforms passed as part of the 2025\u00a0One Big Beautiful Bill Act<\/a> are now in full effect. For small businesses, this means greater clarity and flexibility around\u00a0deductions<\/a>, particularly for R&D expenses and capital investments.<\/p>\n \u201cSome of the more beneficial provisions are this clarity about your ability to fully deduct your R&D expenses and \u2026 your capital investments, your new machinery, your new equipment,\u201d said Bradley. \u201cThat’s been made much more expansive and easier for small businesses. So [if] \u2026 you’re investing in your company, it’s just going to be easier to write that off from a tax perspective.\u201d<\/p>\n On the flip side, new immigration restrictions \u2014 including a $100,000 fee for\u00a0H-1B visas<\/a> and increased visitor requirements \u2014 are making it harder for small businesses to access legal foreign labor. Bradley pointed to a net reduction in overall migration, which has a profound impact on both the availability of workers and local economic activity.<\/p>\n \u201cThere are a lot of communities where immigrant populations made up a significant portion of the consumer base, and suddenly you’re seeing that shift away,\u201d he said. \u201cThat has real consequences for those local economies.\u201d<\/p>\n AI adoption is accelerating, but federal regulation is lagging<\/p>\n AI continues to be a boon to small business innovation, and Bradley is optimistic about its productivity-boosting potential. While state regulations vary and there aren\u2019t currently any federal policies around this technology, there are plenty of AI resources available to small businesses, such as the U.S. Chamber\u2019s upcoming virtual AI training program,\u00a0Small Business bAIsics<\/a>,\u00a0in partnership with Google.<\/p>\n \u201cWhen I talk to small businesses, they’re just getting in \u2026 and figuring out how to use [AI] to improve their own operations,\u201d said Bradley. \u201cSo I think there’s a huge opportunity \u2026 in 2026 for small businesses to boost productivity \u2014 and that ultimately supports a faster-growing economy.\u201d<\/p>\n