Key facts
- Small businesses report that tariffs and higher energy prices are straining their finances and resilience.
- Despite a strong stock market and large corporate earnings, small-business sentiment has sharply declined.
- Many small businesses are halting hiring and expansion plans due to economic pressures.
- The US share of global merchandise trade has reached its lowest point since 2014.
- US trade policies are projected to cause a significant decrease in the nation's share of world trade by 2034.
- China has successfully reallocated its exports to other markets, bypassing US tariffs.
Small businesses in the U.S. are experiencing significant economic headwinds, with many reporting that relentless pressures from tariffs and higher energy prices have eroded their resilience and finances. This comes despite a generally optimistic start to the year, fueled by expectations of easing inflation, lower borrowing costs, tax breaks, and more predictable tariff policies under President Trump.
The ongoing conflict with Iran has exacerbated these challenges, increasing fuel and material costs and accelerating inflation. This has diminished hopes for further interest rate cuts this year, further pressuring businesses.
While large corporations have reported strong earnings and the stock market has boomed, small-business sentiment has sharply declined. Consequently, many firms have halted hiring and expansion plans. The National Federation of Independent Business reported its lowest economic expectations since President Trump's second term began, and small-business profitability growth slowed to a two-year low in April.
Globally, the U.S. is seeing its share of world trade diminish. According to the World Trade Organization, the U.S. share of global merchandise trade in the third quarter was the lowest for that period of the year since 2014. Inbound container volumes through North America have also declined significantly. Projections suggest the U.S.'s share of world trade could fall from 12% in 2024 to 9% by 2034 due to policies pursued by the Trump administration.
This shift is partly driven by China's successful 'great reallocation' of exports to other markets, such as Southeast Asia, Africa, Europe, and Latin America, bypassing U.S. tariffs. Many other nations are trading more with each other and relatively less with the U.S. German firms have resumed investments in China and paused expansions at U.S. affiliates, citing Trump's trade policies. European investors are also reconsidering their holdings of U.S. financial assets, contributing to the dollar's weakening.