How Small Businesses Are Doing Under the New Regulatory Environment

In early 2025, the Trump administration launched an aggressive deregulation agenda to reduce federal red tape that small businesses had long cited as a major burden. Through executive orders requiring agencies to repeal at least ten existing rules for every new one issued, along with actions by the Small Business Administration’s Office of Advocacy and a new Deregulation Strike Force, the administration claims to have delivered significant relief.

By the end of 2025, these efforts reportedly reduced regulatory burdens on small businesses by approximately $110 billion, with additional savings from rolling back Biden-era rules on beneficial ownership reporting, energy efficiency standards, and certain labor provisions.

Key Regulatory Changes

The new environment features several targeted reforms. The administration rescinded or delayed CFPB rules on small-business lending data collection, eased joint-employer standards at the NLRB, and proposed returning to a simpler independent contractor test at the Department of Labor. Rollbacks of certain EPA rules, including those tied to the Endangerment Finding, along with delays or repeals of appliance efficiency standards and CAFE penalties, have lowered compliance costs in the manufacturing and energy sectors. The Beneficial Ownership Information reporting requirements were significantly narrowed, saving businesses an estimated $9 billion and millions of paperwork hours annually.

Labor-related changes have been especially welcomed by many owners. Relaxed overtime, unionization, and non-compete rules from prior years have given businesses more flexibility in managing their workforce. Combined with tax provisions in the One Big Beautiful Bill Act—such as permanent full expensing for capital investments and R&D deductions—small firms report greater ability to invest without immediate tax penalties.

Positive Impacts and Optimism

Many small businesses have benefited from lower compliance costs and greater operational flexibility. The SBA’s first-year report highlighted the influence of 23 regulations affecting tens of millions of businesses, along with a Red Tape Hotline for direct input. NFIB surveys earlier in 2026 showed optimism above long-term averages in some months, with owners citing reduced regulatory pressure as a factor supporting resilience amid other challenges. Sectors such as manufacturing and energy have seen particular relief, with lower input costs from relaxed environmental and efficiency rules contributing to modest investment gains.

Broader economic data indicate that private-sector job growth is outpacing public-sector additions, with small businesses—employing nearly 46% of private-sector workers—playing a key role. Projections from the White House suggest that deregulation could boost GDP growth and wages over time by removing barriers that disproportionately affect smaller firms without dedicated compliance teams.

Challenges and Mixed Results

Despite deregulation wins, the picture remains uneven. Tariffs imposed in 2025 significantly raised costs for many importers, with surveys indicating that 42% of small businesses faced higher expenses, particularly in retail, manufacturing, and hospitality. Some analysts estimated that small businesses paid billions in additional tariff costs, leading to price hikes, margin compression, and, in certain cases, job reductions. A Supreme Court ruling later invalidated portions of these tariffs, offering potential refunds but leaving lingering uncertainty.

As of March 2026, the NFIB Small Business Optimism Index fell to 95.8—below its 52-year average—amid rising uncertainty, weaker profit trends, and concerns about energy prices and input costs. Labor quality and compensation pressures persist, though at moderated levels. While deregulation has eased some administrative burdens, broader economic factors, such as lingering inflation and supply chain adjustments, continue to test resilience.

Outlook for Small Businesses

The regulatory shift has created a more favorable baseline for many Main Street operators, particularly those in capital-intensive or energy-dependent industries. Reduced paperwork and compliance burdens free up resources for growth, hiring, and innovation. However, success depends on navigating remaining trade uncertainties and effectively leveraging tax incentives.

Small business owners can maximize their advantages by staying informed through SBA resources and NFIB updates, automating compliance where possible, and focusing on domestic supply chains or efficiency improvements. Consulting with tax and legal advisors remains essential to fully capture the benefits of expensing rules and new flexibilities.

Overall, the new regulatory environment offers tangible relief from prior overreach, laying a foundation for stronger performance even as external pressures, such as tariffs and energy costs, create headwinds. As millions of small firms adapt, the coming months will test whether sustained deregulation translates into broader prosperity and renewed confidence on Main Street. Early indicators point to cautious optimism, tempered by real-world economic realities.