Reinforcements Arrive: 25 States Join Small Businesses' Tariff Fight

Key Trends

• Small-business hiring held steady in July: Paychex’s jobs index for firms with fewer than 50 employees registered 99.23, in line with the first half’s 99.20 average, per the Paychex Small Business Employment Watch. Growth in hours, not headcount, is driving it — weekly hours worked rose 0.40%, the strongest gain in more than five years, while hourly earnings growth stayed under 3% (2.86%), pushing weekly earnings growth to 3.14%, its best mark since December 2023.

• Profitability is finally following: the Bank of America Institute’s Small Business Checkpoint found small-business profit growth turned positive on a three-month moving average for the first time this year, with hiring-linked payments up 11% year over year in June. Costs are still climbing alongside revenue for many firms, so the margin relief is thin — both reports set up Friday’s BLS jobs report as the next real test of whether “more hours, not more hires” holds.

Notable Businesses & Launches

• Dollar General opened its annual Call for Small Businesses, inviting U.S. small businesses that haven’t sold to the retailer in the past 18 months to apply for vendor consideration through Aug. 17 via RangeMe; selected applicants get virtual meetings this fall plus access to SBA-linked funding, counseling, and training through the company’s Small Business Development Academy.

• Wetzel’s Pretzels and Cold Stone Creamery opened a co-branded store in the Bronx at 1957 Turnbull Avenue, run by veteran multi-unit franchisee Arshad Khwaja — one of more than 17 co-branded locations the two chains plan to open together in 2026 as the store-within-a-store format spreads.

Funding & Investment

• Dili, which automates certified-payroll and prevailing-wage compliance for contractors on federally funded infrastructure projects, raised $21.7 million — a $15M Series A plus its earlier $6.7M seed — led by Khosla Ventures, with Allianz and Y Combinator’s Garry Tan also participating.

  Unverified

  Dili’s claim of having processed $1.4 billion in wages and nearly 16,000 certified payroll reports is self-reported by the company with no independent corroboration.

• Baselayer, which sells AI-driven identity verification and fraud screening that banks and lenders use to vet small-business customers during onboarding, raised a $20 million Series A from Koro Capital and M13, bringing its total funding to $47 million.

Regulatory & Economic Context

• Update: The small-business tariff fight widened. Weeks after Burlap & Barrel and Collective Horology sued over the administration’s new Section 301 tariffs, 25 states filed a parallel suit in the Court of International Trade arguing the 10–12.5% duties on 59 countries and the EU — nominally justified by forced-labor enforcement failures — are a pretextual revival of the IEEPA tariffs the Supreme Court struck down in February. Both suits seek refunds of duties already collected.

• The SBA disclosed loan-level delinquency, guaranty-purchase, and liquidation data for individual 7(a) loans for the first time in the agency’s history, showing a dollar-weighted delinquency rate of 2.2% across the 20 largest 7(a) lenders as of Q1 2026 — new visibility for lenders and investors just as the agency’s loan ceiling doubles.

  Unverified

  Figures are drawn from trade-press coverage of the SBA’s FOIA data release; the primary data.sba.gov dataset was not directly accessed to confirm the 2.2% figure.

Takeaway