Investment bank says tariffs are devastating these businesses | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

President Donald Trump rode into the White House on a wave of populism, but his economic policies are devastating the middle class, according to multiple metrics.

When Trump first signed his tax cuts into law in 2018, the left-leaning Brookings Institution predicted they would mostly benefit the wealthiest Americans.

“The benefits of the law tilt toward the well-off both now and in the future, according to the distributional analysis of the Tax Policy Center. By 2027, benefits of the tax law flow entirely to the rich (the Joint Committee on Taxation finds similar results using a different measure),” it said in a report.

But just because two independent economic analyses predicted the tax law would tilt the tax code in favor of the rich doesn’t mean others haven’t come to a different conclusion.

While Brookings calls the evidence for long-term growth “weak at best,” there are schools of thought saying the tax cuts are a net positive for the middle class.

“The theory is that the lower corporate rate and temporarily expanded business expensing will spur investment in the United States, leading to more capital and more productive workers. As worker productivity rises, firms will boost wages. All of this would happen gradually over the long term.”

But economists at the time could not have predicted a world with 25% tariffs against most of our biggest trade partners (a 55% rate with China), and that burden has placed a lot of assumptions about what businesses would do with a lower tax rate.

And tariffs are also going to be a major burden for the middle class, according to a new report from the more politically neutral bankers at JPMorgan Chase.

Small and midsize businesses employ nearly half of all Americans.

Image source&colon; Christian/San Francisco Chronicle via Getty Images

Small businesses will hurt the most from tariffs resuming

While the pause in tariffs over the last few weeks has brought welcome relief, the July 9 deadline for countries to negotiate a new deal is fast approaching.

While the stocks of multibillion-dollar companies are likely to have a rough time if the tariffs resume in full, medium-sized businesses that make up a significant portion of the economy — and the middle class — are going to suffer even more.

Middle-market or midsize firms are commonly defined to include companies with annual revenues between $10 million and $1 billion. These types of companies account for a third of all U.S. private-sector employment and revenue.

Those companies are also most likely to import their goods from China, according to the JPMorgan report.

The largest share of U.S. imports came from China in 2022 with 17.7%, but midsize companies were even more reliant on China, with nearly 21% of imports originating there.

If no deal is reached with China by next week, then those businesses will have to pay the 55% tariffs that will resume.

Wholesale traders represent the largest import sector and therefore bear most of the tariff burden.

The firm estimates that current policies leave midsize firms facing as much as $82.3 billion in costs just this year.

“Wholesale and retail trade are the most tariff-exposed industries, and these firms often do not have much scope to lower their margins,” the report states.

“Therefore, there is a risk that a significant share of costs will be passed on to other firms and to end consumers. This could be particularly painful for the lowest-income households, who are the most sensitive to rising retail prices.”

Midsize businesses are crucial to U.S. economy

Midsize companies typically employ between 50 and 250 employees.

According to Indeed, there are about 200,000 midsize companies in the U.S.

Combined, small and medium-sized businesses employ about 46% of all American workers, or about 59 million people.

Small businesses represent about 44% of gross domestic product while paying 39% of all private sector payroll.

Between January 1995 and June 2023, small businesses created 20.2 million jobs, compared to the 12.8 million created by large businesses — a 60% to 40% split.