America’s Business Growth Engine Braces for Global Trade Wars
February 21, 2017
How SMBs Can Leverage Globalization
Small businesses have been the growth engine of the American economy for years. But while many people still think of these small 1-50 employee businesses as local Mom and Pop shops selling to the neighborhood, these entrepreneurs and innovators and have leveraged the opportunity of globalization to grow faster and provide new jobs for a long while. Ninety-seven percent of US exporters are SMBs and they account for a significant and growing share of export value. SMBs fuel a significant portion of US imports as well. All told, small businesses in America account for 94.4% of total imports and exports by volume.
It’s no secret to small business owners that 95% percent of the world’s consumers are outside the US borders. Since 2006, the value of small business exports has grown by 16%—a full 35% faster than large business exports. The plain fact of the matter is that SMBs aren’t going global—they’re global now. Access to new markets, opportunities to boost profits, and the ability to mitigate risk have sent small businesses out to established and emerging markets all over the globe in search of new and diversified customers and supply chains. Global trade is plainly a good business.
“High-demand imports like artisan crafts, furniture, shoes, clothing and food are lucrative markets with margins reaching up to 700%.” -Small Business Administration
And while 2017 has been a year of backlash against globalization and international trade, the digitization of our world is the horse that has left the barn, as it were. Globalization is a done deal; there’s no going back. No matter the political climate, global markets are now indelibly interconnected by technology. It’s a unique time for SMBs. More than at any other time in our history, American small businesses will look to geopolitics for their biggest challenges.
While the US stands on the precipice of pulling back hard on global trade, the global SMBs that make up a large share of our economy are feeling the pinch of living in a precarious environment. As the US rethinks the free trade policies embraced by the likes of a Trans Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA), small business owners are right to worry about potential losses that may come from increased tariffs at best—global trade wars at worst. NAFTA partners make up the largest share of US exports, with Pacific Rim countries falling in not far behind.
But it’s important to note that global trade flows are dynamic of their own accord. Governmental trade policies, of course, can have a significant impact, but the wheels are perpetually in motion. Latin America, for example, one of the US’s main trading partners, has been increasingly looking to China for trade. Two-way trade between the regions increased by 660% in the first decade of the Millennia.
Yes, global SMBs face unique geopolitical challenges in the year ahead, but there are forces at work that will be difficult to turn on a dime, no matter what policies come out of Washington. International trade makes up 30% of the US economy. In our irreversibly interconnected world, international trade is here to stay. And with SMBs employing half the US workforce and creating 2/3 of net new jobs, a large portion of that international trade will continue to come from global small businesses. Good thing this segment of our economy has a long history of extraordinary performance. Small global businesses are 20% more productive than domestic only firms and produce 20% more jobs. Despite the current backlash against globalization, expect global small business, micro business—even “solopreneurship”—to continue to expand in 2017.