Small Business Optimism falls – The Daily Tearsheet

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Vital Statistics:

Stocks are higher this morning as markets calm down over the tariffs. Bonds and MBS are down.

The mystery remains as to Trump’s intentions: Are these tariffs a negotiating ploy to get other countries to reduce their tariffs or does Trump envision these as a permanent fixture of the US economy. If you ask Chat GPT, it will tell you that Trump is ideologically committed to them, but Chat GPT is collecting its data from the press, which is speculating. No one really knows what Trump is thinking here.

On the other hand, Trump appears to view the US’s Naval enforcement of shipping lanes as something that should be paid for by our trading partners. I am not sure how imposing costs on US consumers accomplishes that.

As markets and polls fall, Congress will lose patience with tariffs and pass legislation that sunsets these tariffs unless extended by Congress. All Democrats will be onboard and it won’t take many Republicans to get it through. The ability for the President to pass tariffs on national security issues was always dubious at best and tariff / trade policy should be controlled by Congress, not unilaterally by the Executive Branch.

Bottom line: I don’t think this lasts through the summer, but that is just my opinion (hope).

Small Business optimism fell in March, according to the NFIB. Inflation fell from the the top of the list of concerns, while labor quality remained the biggest problem. Uncertainty is climbing.

“This year will be one ruled by uncertainty. Global and domestic actions are
generating insecurities in abundance, both political and economic. President Trump’s administration is rearranging the deck chairs at a record pace. Is there an “iceberg” looming ahead or will we sail through to a restructured economy safely? Since 1986, NFIB’s Uncertainty Index (based on the percent of respondents reporting “uncertain” or “don’t know” to six questions) has averaged 68. But, since 2016 it has averaged 80 and reached its highest level of 110 in October 2024.”