Rising Recession Risks From Tariffs Threaten Small Businesses Nationwide

Rising Recession Risks Linked to Tariffs Impacting Small Businesses As fears of an impending recession grow, Apollo Global Management's chief economist, Torsten Sløk, has indicated a staggering 90% probability of an economic downturn this year. The potential source of this economic strain? The tariffs imposed by the current administration, which are poised to significantly impact small businesses—a crucial segment of the U.S. economy. Sløk highlighted that these import duties could lead to a contraction in economic growth, estimating they might reduce the U.S. GDP by up to four percentage points. This estimate reflects the adverse effects felt when tariffs were first levied on goods from China in 2018. "Tariffs have been implemented in a way that has not been effective, and there is now a 90% chance of what can be called a Voluntary Trade Reset Recession," Sløk wrote in his note to clients over the weekend. He elaborated on the challenges facing small businesses, many of which lack the necessary capital to absorb these increased costs from tariffs. "Small businesses that have for decades relied on a stable U.S. system will have to adjust immediately and do not have the working capital to pay tariffs," he cautioned. Sløk predicts that consequences could include canceled orders, idle shipping containers, and even prominent retailers facing bankruptcy. The Economic Role of Small Businesses Small firms play a pivotal role in the labor market, comprising the majority of U.S. employment. According to Apollo's analysis, as of January, businesses with fewer than 500 employees accounted for approximately 110 million jobs—almost four times the employment generated by larger corporations. Additionally, these businesses are significant contributors to overall investment in the economy. In the first quarter of 2024, U.S. private fixed investment amounted to about $4.2 trillion, dwarfing the capital expenditures of S&P 500 companies, which were around $1 trillion. Historically, small businesses have also contributed a substantial share to the nation's GDP. In 2014, they represented $5.9 trillion, or 44%, of the total GDP. Sløk warned, "The bottom line: if the current level of tariffs continues, a sharp slowdown in the U.S. economy is coming." This prediction is underscored by the widespread concern among small business owners about the financial fallout from tariffs, with a Vistage Worldwide survey revealing that two-thirds of small businesses expect to suffer due to tariff-related pressures. For further details on this developing economic outlook, you can read the original article on Business Insider.