Small businesses, big problems

The vibes right now in an indie stationery store couldn’t be more tense. Small businesses, from perfectly curated consumer-facing shops to niche valve makers you couldn’t name, are not feeling confident right now. Optimism dropped among businesses with fewer than 500 employees in April, according to a National Federation of Independent Business (NFIB) survey released last week.

Every month the NFIB asks small business owners about hard data like job openings and inventory as well as more vibes-based questions like expansion plans. Then, it creates an index to illustrate the economic conditions those businesses are navigating. The results?

• April was the fourth consecutive month of falling optimism, dropping to 95.8. It was also the second month in a row that the index was below the 51-year average of 98.
• More recently, the index has hovered between high 80s to low 90s from mid-2022 to last October. In December, it jumped to a four-year high of 105.1.

One of the biggest forces dragging the mood down since the start of the year is the business owners’ outlook on future business conditions, primarily uncertainty related to tariffs. While the 90-day pause on 145% Chinese import tariffs offered some business owners a chance to exhale, it doesn’t paint a clearer picture on how they can move forward.

A teeny, tiny umbrella

Even though its diversified product offering will likely help it weather the storm, the world’s largest retailer Walmart said last week that it would have to raise some prices due to tariffs. Apple is shifting more iPhone production to India.

While massive publicly traded companies like those are rushing to pivot, tariffs could be deeply detrimental for small businesses with a thinner catalog of products and a margin to match. And even if they could find a supplier in a country without massive tariffs that would take their smaller volume of orders, the uncertainty of trade decisions from President Trump’s desk feels like too much of a risk.

Bottom line: If small businesses struggle, so will the rest of the economy. Not only do these companies make up 43.5% of the US GDP, companies with fewer than 250 employees accounted for nearly 80% of job openings.—MM