In a vise of slowing demand and rising costs, small businesses are signaling trouble ahead
But demand cratered in mid-March as national economic sentiment slid in the wake of the Trump administration's trade war, and Altman, 53, is now running on savings and credit and about to cancel his planned home improvements to keep his workers paid, an example of how U.S. growth may be folding in on itself more broadly.
'I think it kind of crept up on me, because I'm so used to having everything just work itself out. I was just waiting for those emails… And they just never came," Altman said of an order flow that as of mid-April was down to a couple days a week. "All of a sudden, next week was empty and I had no leads and I was getting no calls.'
Altman's story could take on broader significance in coming weeks as evidence builds of an economic slowdown coinciding with President Donald Trump's effort to rewire the global economy with tariffs, as households and firms cut spending out of concern for what lies ahead and try to cope with new import taxes that have begun raising supply costs and prices. The full brunt of that effort has not even been felt yet. Trump has put some of his most aggressive trade actions on hold until July, with no certainty about what he will do if his administration fails to negotiate individual deals with up to 90 countries as a substitute for sweeping and steep tariffs on imports from those nations. On Monday, U.S. Treasury Secretary Scott Bessent said the first of those trade agreements may come this week or next, though a deal with China, the nation's biggest trading partner, appeared to be no closer.
In the meantime economists have upped their odds of a recession this year in what analysts at the Institute of International Finance said recently would be a downturn due to "deliberate policy engineering." Unlike Altman, bow tie manufacturer Beau Ties of Vermont is in the direct line of fire from tariffs that threaten to push prices to prohibitive levels on the Chinese-made fabrics that owner Greg Shugar uses at his factory.
Trump has pushed tariffs on Chinese goods to 145%, and while that may be negotiated lower, Shugar said "we will go out of business if the 145% sticks...I can't imagine us lasting more than 6 to 9 months when all my hoarded fabric runs out...The irony of the whole thing is that we are a Made-in-America company who is supposed to benefit from all these tariffs."
UNCERTAINTY DOMINATES
Measures of uncertainty over Trump's first 100 days in office have soared to levels last seen during the COVID-19 pandemic, and consumer and business surveys are showing a steady slide in confidence and an erosion of hiring and investment. Trump's polling numbers on the economy, considered a strength coming out of the 2024 election, have slipped: Only 37% of respondents to a recent Reuters/Ipsos poll approved of his economic management and three-fourths concerned a recession is coming. The latest twice-quarterly pulse-taking of the economy by the Federal Reserve's 12 regional banks painted a dour landscape of falling demand, projects stalled due to "pervasive" uncertainty, and initial hints of layoffs to come. Shipping industry officials, separately, warn of a sharp downturn developing in U.S.-bound cargo. While slowdown indications are largely limited so far to that kind of "soft data," such information has become increasingly important to policymakers as signaling a shift in the direction of an economy that was on solid footing when Trump took over.
Key updates are due soon: April's jobs report will be released Friday; data on first-quarter economic growth - the first overall scorecard since Trump's inauguration - is due Wednesday, with economists estimating growth at near stall speed. Some hard data is starting to turn as well, including a slower rate of hiring and a lengthening of the average spell of unemployment, a pattern that has "frequently occurred during the onset of recessions," according to recent San Francisco Fed research.
'GOING TO HIT EVERYBODY'
An analysis of economic conditions among small businesses by software firm Intuit estimated that firms with nine or fewer workers cut employment by 3.5% over the first quarter of the year.
Revenue did rise, and recent Census data has shown a still elevated level of business creation, a trend considered a sign of underlying resilience.
But there are concerning signs, said Ufuk Akcigit, a University of Chicago economist who has developed indices of small business hiring and revenue from Intuit's data on about 400,000 firms using the company's software.
Alongside the hiring slowdown, he said, separate data shows a growing gap in credit card usage and payments among small businesses, with firms seemingly caught in a vise of rising input prices and potentially mounting debt.
"Small businesses are really early indicators of what's coming...The top two agenda items - prices and interest rates - are both getting problematic...They are getting into more distressed situations," Akcigit said. On jobs "the trend has been negative for some time and it accelerated when uncertainty started to rise substantially." Damion Love, manager and buyer for Belle Up Boutique, an independent women's clothing store near a commuter rail station in Chicago's Beverly neighborhood, said his immediate concern is inflation. He has been notified by some of the store's clothing brands that wholesale price hikes of at least 10% are likely in the coming months, but a lot depends on the level and duration of Trump's tariffs. While the store sells some clothing lines made in Los Angeles and Chicago, other lower-priced items are made in China and could face taxes that would more than double the cost to import.
"It hasn't hit us yet, but we know it's going to hit everybody," Love said.
The larger concern is how customers will react.
While the 16-year-old boutique's clientele is loyal, he said, "in this economy, everything is about pricing...If a top is $49 and it shoots up to $80, the consumer isn't going to say, 'Oh, it's not your fault.' They're just not going to shop here." In Oakland, Altman spelled out the larger risks if the current outlook becomes the new reality.
"Anxiety has gone to the roof,' he said, 'I have five employees that I need to keep paid, right? Because they have families and because they have bills to pay, they've got rents to pay.'
(Reporting by Howard Schneider Additional reporting by Ann Saphir in San Francisco, David Lawder in Chicago, and Arriana McLymore in New York; Editing by Anna Driver and Dan Burns)
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