For CEOs of small and midsize businesses, the on-again, off-again tariffs and the looming threat of reciprocal trade policies are fueling increasing uncertainty about the year ahead. This concern is reflected in early findings from the Q1 2025 Vistage CEO Confidence Index survey, where 42% of CEOs predict the economy will worsen in the coming year—a sharp rise from 13% just one quarter ago and double the proportion from Q1 2024.
Tariffs: A Primary Driver of Economic Pessimism
Changing tariff and trade policies are a major contributor to CEO concerns, with 69% reporting a negative impact on their businesses. Many view tariffs as inflationary, leading to higher costs for companies and consumers alike. Industries like manufacturing, construction, and international trade feel these effects most acutely, facing eroded profitability, declining margins, and supply chain disruptions.
Strategies for Navigating Tariffs
Despite the uncertainties, small and midsize businesses can take proactive measures to mitigate the impact of tariffs. These include:
1. **Conserving Cash: Strengthen liquidity by delaying non-essential expenditures, optimizing accounts receivable/payable, or exploring financing options.
2. **Building Inventory: Stockpiling key materials before tariff hikes, while carefully assessing storage costs and sourcing alternatives.
3. **Revisiting Pricing Strategies: Incremental price adjustments, value-added offerings, or supplier negotiations can help protect margins.
4. **Implementing Cost-Saving Measures: Improve operational efficiency, invest in automation, and reduce discretionary spending to buffer against tariff-induced price hikes.
5. **Evaluating Supply Chains: Diversify sources, explore nearshoring/reshoring, and lock in contracts to reduce tariff exposure.
While these measures can alleviate immediate pressures, they don’t fully address the root cause: uncertainty.
The Ripple Effect of Uncertainty
Tariffs and trade policies amplify economic unpredictability, creating downstream impacts:
– **Personnel Adjustments: Fewer CEOs plan to grow their workforce, while the proportion planning layoffs has risen to 14%—the highest since the pandemic and the 2008-2009 recession.
– **Profitability Challenges: Increased pricing pressures from tariffs have led to a rise in CEOs expecting decreased profits, now 23% compared to 10% last quarter.
– **Slower Growth Expectations: CEO predictions for revenue growth have fallen from 76% last quarter to just 58%, signaling recessionary concerns if demand continues to weaken.
– **Price Increases: Over half of CEOs plan to raise prices in the next three months, with many opting for increases well above inflation to counter rising costs and protect margins.
Adapting to Tariff-Induced Challenges
Among strategies to manage these rising costs, CEOs are implementing tariff surcharges—transparent line items that can be adjusted as needed. This tactic enables flexibility while safeguarding profitability.
For further insights into how CEOs are navigating these challenges, stay tuned for a detailed analysis of the Q1 2025 Vistage CEO Confidence Index survey, coming in April. It will provide deeper perspectives on shifting confidence levels and actionable strategies for adapting to evolving trade policies.
By staying proactive and aligning strategies with economic realities, CEOs can build resilience and position their businesses for success despite ongoing uncertainties.
Please contact us to start a conversation on how can help your business generate more cash, profits and business value through these hard times: https://calendly.com/veritascfo/fractional-cfo-meeting