SMBs Worry About Tariffs, Supply Chain, Labor Issues

Small- and medium-sized businesses (SMBs) are feeling some heat as uncertainty risks rise.

And what are SMBs worried about? Tariffs, supply chain, labor quality and inflation are just some of their concerns, according to both a report from Netstock and the National Federal of Independent Business (NFIB).

A majority of Netstock’s SMB customers, which have under $250 million in revenue, said they are bracing for a “significant impact from tariffs.” And with 75 percent either not implementing tariff mitigation strategies before or have faced challenges doing so, there is widespread concern for supply chains and their vulnerability to challenges. In fact, nearly 20 percent of SMBs have over 75 percent of their inventory exposed to tariff risks.

The supply chain concerns include worries over increased costs, with 70 percent indicating that is their biggest challenge. But it’s not the only challenge. They’re also concerned about demand disruptions. Fifteen percent said they are worried about customer purchasing behavior shifts under tariffs. In addition, 6.5 percent cited concerns over supplier reliability, while 4 percent expressed compliance concerns.

Forty-seven percent of Netstock respondents also expressed great concern regarding tariffs impacting trade with China, with a combined 74 percent viewing tariff risks as either moderate or severe. In contrast, only 7 percent expressed great concern about tariffs involving Canada, and just 6 percent felt similarly about Mexico.

And while one might think that many businesses are rethinking their sourcing strategies or supplier networks connected to China, over half at 57 percent are adopting a “wait-and-see” approach as they delay major changes. “This cautious stance reflects the unpredictability of the current trade environment,” Netstock concluded. At the same time, 58 percent of SMBs are laying the groundwork for greater flexibility in their supply chains down the road, with 15 percent seeing nearshoring as a possibility. This longer-term thinking suggests that SMBs aren’t expecting a swift resolution to the tariff disputes, Netstock said.

The majority of Netstock respondents at 78 percent are using some form of data-driven tools in their supply chain strategies, helping them optimize inventory levels and boost overall supply chain resilience through solutions that are powered through artificial intelligence.

NFIB, the industry trade organization, on Tuesday said its NFIB Small Business Optimism Index fell by 2.1 points in February. While the latest reading represents the fourth consecutive month above the 51-year average of 98, it is also 4.4 points below its most recent peak of 105.1 in December. NFIB’s Uncertainty Index also rose four points to 104, representing the second highest recorded reading, the trade organization said. NFIB has been conducting quarterly surveys since the fourth quarter of 1973, and monthly surveys since 1986.

“Uncertainty is high and rising on Main Street, and for many reasons,” NFIB Chief Economist Bill Dunkelberg, said, adding that the small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand declined. “Inflation remains a major problem, ranked second behind the top problem, labor quality,” Dunkelberg noted.

NFIB data points indicate that the net percent of owners expecting the economy to improve fell ten points from January to a net 37 percent, seasonally adjusted. The net percent of owners raising average selling prices rose 10 points from January to a net 32 percent, also seasonally adjusted. This represents the largest monthly increase since April 2021. the percent of owners lowering their prices is 10 points lower than it was one year ago. A net 29 percent, seasonally adjusted, plan price hikes in the next three months, up three points from January and representing the highest reading in 11 months.

The business owners who responded to the NFIB survey said labor costs was their most important problem , up three points to 12 percent. That is only one point below the survey’s highest reading of 13 percent in December 2021. Moreover, a net 2 percent of owners said that their last loan was harder to get than in previous attempts, with the last time this reading was this low was in February 2022.

Separately, NFIB’s monthly jobs report found that a seasonally adjusted 38 percent of all small business owners said reported job openings they could not fill in February, up three points from January and representing the highest reading since August 2024. And of the 53 percent of owners hiring or trying to hire in January, 89 percent said there were few or no qualified applicants for the positions they were trying to fill.