Small Business Confidence Drops as Tariff Uncertainties Mount

Source: YouTube

Small business sentiment is weakening across the United States. Recent data from multiple national surveys show that optimism is declining, hiring plans are slowing, and financial stress is rising, largely driven by inflation, reduced consumer demand, and escalating trade uncertainty. In the second quarter of 2025, only 30% of small business owners rated the state of the U.S. economy as excellent or good, according to the CNBC|SurveyMonkey Small Business Survey. That’s down from 39% in the previous quarter and reflects a broader shift in confidence amid ongoing tariff policy debates.

Seventy percent of respondents now believe the country is heading toward a recession. That view cuts across party lines, with nearly half of Republican business owners and most Democrats expressing concern. Overall disapproval of President Trump’s handling of the economy has reached 51%, up from 39% in the final quarter of his first term.

Tariff Fears Rise

Concerns over trade policy are increasingly top of mind. Fifty-one percent of small business respondents said they expect changes in trade policy to have a negative impact on their operations within the next year. In total, 66% say they have already been or will soon be affected by new tariffs.

Importers are already feeling the pressure. The new 145% tariff on Chinese goods has led many small firms to cancel or delay orders from manufacturers overseas. Jewelry companies, toy makers, and electronics brands have announced price hikes. Small businesses expect similar cost increases across supply chains.

Despite calls for relief, the Trump administration has not responded to appeals from the U.S. Chamber of Commerce. In a letter sent last month, Chamber CEO Suzanne Clark warned that “irreparable harm” could be done to small firms if tariff relief is delayed. She called for an immediate suspension of all tariffs on small business importers.

Trump later hinted that he might scale back the tariff on Chinese goods to 80%, but that promise has not been formalized.

Stress and Spending Pullbacks

The cumulative effect of inflation and tariffs has left small business owners more financially strained. Sixty percent of those surveyed said they are experiencing moderate to high levels of financial stress related to their business. For personal finances, that figure was even higher at 63%.

Federal Reserve Chair Jerome Powell warned that prolonged tariff policies could slow growth and raise long-term inflation. He noted that while the immediate price spikes may level off, persistent uncertainty and input costs could linger.

Hiring has already started to decline. In April, the National Federation of Independent Business (NFIB) optimism index fell to 95.8, its lowest level since late 2024. It marks the fourth consecutive monthly decline and sits well below the long-term average of 98.

A six-point drop in expected business conditions and a matching drop in job openings drove the decline. Thirty-four percent of business owners reported having unfilled job positions—down from earlier in the year and the lowest level since January 2021.

Uncertainty Stalls Growth Plans

The broader uncertainty around trade policy has frozen many strategic decisions. Small business owners are delaying investments, pausing hiring, and reconsidering inventory levels. The number of owners expecting improved business conditions in the next six months fell to its lowest point since the post-COVID downturn.

Bill Dunkelberg, NFIB chief economist, said in a statement that small businesses are struggling to operate without clear expectations. “Uncertainty continues to be a major impediment for small business owners, affecting everything from hiring plans to investment decisions,” he said.

The mood could shift if trade policy stabilizes. The April NFIB survey was conducted before the U.S. announced a framework deal with the U.K. and a 90-day pause on the steepest new tariffs against China. However, it remains unclear whether those developments will translate into durable relief.

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