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The Trump administration’s dizzying back-and-forth on tariffs is paralyzing America’s small businesses as they grow worried about the US economy’s future.
The National Federation of Independent Business’ Uncertainty Index climbed in February to its second-highest reading on record, going back to 1973, according to the group’s latest survey released Tuesday. In February, the share of respondents who believe it is a good time to expand saw its biggest monthly decline since April 2020.
“Uncertainty is high and rising on Main Street, and for many reasons,” Bill Dunkelberg, the NFIB’s chief economist, said in a release. “Confidence that the economy will continue to grow is fading.”
President Donald Trump’s whipsawing trade policy has unsettled America’s decision makers and ignited fears of inflation picking back up. Recession fears are also taking hold, and on Sunday, Trump refused to rule out an economic downturn this year, which sent major stock indexes reeling.
All of that is now confusing a large swath of the US economy, according to the NFIB’s latest survey. The White House has frequently pointed to NFIB data as an indication of economic strength – a November survey following Trump’s election showed small business optimism rose by the most in any month in history. But since then, optimism has fallen.
There are more than 33 million small businesses in the United States, according to the Small Business Administration, which employs nearly half of all private-sector workers. A looming global trade war, which threatens to jack up prices, coupled with signs of a sputtering economy, is giving small businesses some pause.
“The uncertainty we face in the economy has no set timeline,” Mark Valentino, head of business banking at Citizens Bank, said in commentary issued Tuesday. “Business owners are reevaluating vendor contracts, labor force and borrowing strategies.”
He said tariffs are raising concerns among small businesses of higher costs, which means they’re likely taking a hard look at their cash flow and reviewing other financial statements to “identify areas for improvement.”
Earlier this month, Trump kept his promise of imposing a blanket 25% tariff on Mexico and Canada, after delaying them for a month — then quickly lifted tariffs for all Canadian and Mexican imports that fall under a North American free trade agreement. Meanwhile, Trump doubled tariffs on China to 20%, on top of existing duties.
The Trump administration has said it’s not done with its overhaul of US trade policy, promising to deliver tariffs that match other countries’ dollar for dollar, or so-called reciprocal tariffs, on April 2.
“The Trump administration is putting American jobs, products and strength first,” Kelly Loeffler, the administrator of the Small Business Administration, said Monday at a press conference in Indianapolis.
The administration is also clamping down on immigration — both legal and otherwise — which is forcing small businesses to “remain cautious in this regard as well,” Valentino said.
That could raise labor costs for certain industries such as construction and agriculture, and in the NFIB’s latest survey, the share of respondents deeming labor costs as their biggest problem jumped in February and was “only one point below the survey’s highest reading of 13% reached in December 2021,” according to a release.
