Post-election optimism reverses swiftly over tariffs [WSJ/Vistage Feb 2025]

The post-election confidence among small businesses has reversed over the last few months, dropping the WSJ/Vistage Small Business Index to 94.8 as details on tariffs — when, where and how much — have become clearer.

While small business confidence has returned to pre-election levels, the 12-point, month-over-month decline marks the second-largest drop in the survey’s history, following the onset of the pandemic in March and April 2020. Nearly one-third of small businesses (32%) believe the economy will worsen in the coming year, more than doubling last month’s 14%.

Additionally, less than half (46%) of small businesses believe the economy will improve in the coming year, a 17-point decline from the recent peak of 63% in November. The reality of tariffs has dimmed the optimism small businesses experienced after the election; more than half (54%) of small businesses expect negative impacts from tariff and trade policies.

New tariffs on China took effect earlier this month, and small business CEOs and owners report that trade policies with China are their top concern currently. Not far behind are the tariffs on Canada and Mexico, which are looming after a one-month delay was announced. Also on the horizon is the increased tariff on steel and aluminum imports that is set to take effect on March 12. This all points to renewed uncertainty that is slowing demand and delaying investments.

Rapid change in revenue projections

The rapidly changing sentiment about the future of the U.S. economy is also reflected in small business revenue expectations and profitability outlooks. Uncertainty has once again slowed customer demand.

Less than two-thirds (64%) of small businesses expect increased revenues, down from 80% in December. On the other end, those expecting decreased revenues more than tripled from December, reaching 13%. While these proportions are a return to what we have seen throughout 2024, what is concerning is the rate at which these changes have occurred. Other than when the economy shut down in April 2020, this is the largest month-over-month change in revenue expectations in the history of the survey. This is a significant momentum downward, and it will be important to monitor the velocity of these changes in future months.

Price increases mitigate risk for small businesses

Of the small businesses taking action against tariff-related costs, nearly two-thirds (64%) plan to increase prices, passing the costs of tariffs on to customers. To protect margins in the post-pandemic economy, small businesses should reflect on their pricing strategies and lessons learned when inflation drove prices up several years ago.

Another strategy small businesses are employing is a review of their sourcing strategies; 30% report they plan to source goods and other inputs from U.S. companies. While the administration’s intention in implementing tariffs is to bring production to the U.S., there is a delicate balance between the positive impacts of increased sourcing and the resulting inflation due to increased costs that may be more pervasive. Small businesses must raise prices to protect profitability, especially in the face of declining revenues. That might not be enough, as many small businesses report that they are lowering margins to stay competitive.

Downstream effects of higher prices

Price increases and lower margins are only part of the equation for how small businesses can absorb tariff-related expenses. Cost-cutting measures have also become more prevalent, reducing spending in other areas. Indeed, fixed investment spending has also reversed back to pre-election levels, with a smaller proportion (34%) planning to increase and 15% planning to decrease.

Hiring has become more conservative as well. Workforce plans are similar to what we have seen in the last year with less than half of small businesses (48%) planning to add personnel and 8% planning to reduce workforce. Again, it is less about the proportion and more about the velocity of change: This is the second largest month-over-month decline in workforce plans outside the pandemic shutdown in April 2020.

Just as the election sparked inflated optimism, tariffs have just as quickly deflated it. While the components of the WSJ/Vistage Small Business CEO Confidence Index may have returned to pre-election levels, further change at this same velocity may signal larger economic challenges ahead.

February highlights

The February WSJ/Vistage Small Business CEO Confidence Index was calculated from an online survey sent to CEOs and other key leaders who are active U.S. Vistage members. The survey collected data from 415 respondents with annual revenues of $1-20 million and was open between February 3 and 10, 2025, capturing sentiment following the inauguration and implementation of some early orders of the new administration.

• Current economy: 3 in 10 small businesses think the economy has improved compared to last year, a 6-point decline from last month.
• Future economy: Those optimistic about the U.S. economy declined for the third month, reaching 46%, while small businesses that expect the economy to worsen increased to 32%, an 18-point increase.
• Revenue projections: 64% of small businesses expect increased revenues over the year ahead, a 12-point decline from last month. Those that expect decreased revenues grew 7 points to 13%.
• Profitability projections: More than half (53%) of small businesses expect profitability to improve in the next year, a 7-point decline from last month, while those that expect a decline rose 9 points to reach 19%.
• Fixed investment plans: The proportion of small businesses planning to increase fixed investments over the next 12 months fell to 34% while the proportion planning to decrease fixed investments rose to 15%.
• Workforce expansion plans: Less than half (48%) of small businesses plan to add personnel over the next 12 months, a 10-point decrease from last month.

To explore the full February 2025 WSJ/Vistage Small Business data set, visit our data center or download the infographic.

The Q1 2025 Vistage CEO Confidence Index survey will occur March 3-17, 2025.

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