Small businesses say they are already feeling the pain of tariffs: survey

A Goldman Sachs survey indicates that over a third of small businesses are already negatively impacted by tariffs, with nearly 40% anticipating future harm, primarily due to policy uncertainty; 77% of concerned businesses cite this uncertainty as the main driver. Beyond tariffs, 81% of small businesses report difficulty securing affordable financing, leading to curtailed expansion and new ventures, while 82% believe the federal tax code favors large corporations. Despite these challenges, 75% of small businesses remain optimistic about their future, forecasting growth in 2025.

Analysis

A Goldman Sachs survey reveals significant headwinds for U.S. small businesses, with 36% already experiencing negative impacts from tariffs and an additional 38% anticipating future adverse effects. Notably, 77% of these concerned businesses attribute their difficulties primarily to the uncertainty stemming from shifting U.S. trade policies, which include a universal 10% levy on most nations, a 30% tariff on Chinese goods, 25% on imported automobiles and parts, and a 50% levy on steel. These tariffs translate into direct cost increases, exemplified by Johnson Security Bureau's anticipated $50,000 price hike for a new armored truck, and indirect challenges such as project postponements in construction. Compounding these trade-related issues, 81% of small businesses seeking financing in the past year encountered difficulties securing affordable capital, leading 49% to halt expansions and 41% to curtail new ventures due to high interest rates. Furthermore, 82% of small business owners perceive the federal tax code as favoring large corporations, adding to operational complexities. Despite these substantial obstacles, a resilient 75% of small businesses remain optimistic about their future, with 72% forecasting growth in 2025 and many exploring AI for efficiency, although 42% report lacking the necessary resources for implementation. The overall sentiment from the survey indicates a moderately negative outlook shaped by policy uncertainty and financial constraints.

Key Decisions for Investors

• Investors should closely monitor sectors with high exposure to small businesses, particularly construction and those reliant on imported goods like automobiles, auto parts, and steel, given the direct cost pressures and project delays cited due to tariffs.
• Consider the potential for increased credit risk in portfolios with significant small business loan exposure or investments in lenders focused on this segment, as 81% report difficulty accessing affordable financing and high rates are curbing expansion.
• Evaluate companies supplying to small businesses for potential demand softness, but also identify firms that could benefit from the reported 72% of small businesses forecasting growth in 2025 and increased AI adoption, should current headwinds subside.
• Maintain a cautious stance on investments sensitive to U.S. trade policy and small business sentiment until there is greater clarity on tariff regimes and their economic impact, given that uncertainty is a primary concern for 77% of affected businesses.