US Small Business Optimism Rebounds as Tariff Fears Ease

The United States small business sentiment improved during May because of reduced trade tensions with China but the future of President Trump's tax-cut bill remains uncertain. The National Federation of Independent Business reported that its Small Business Optimism Index increased three points to 98.8 during May which marked the first positive change since December.

The trade dispute truce created positive effects on small businesses because Chinese goods tariffs decreased from 145% to 30% until early August. The improvement in sales expectations among small business owners reached 11 points to 10% which became the main driver of the index's overall increase.

The Senate opposition to Trump's tax-cut bill creates ongoing uncertainty while businesses worry about new tariff possibilities. NFIB Chief Economist Bill Dunkelberg stated that Congress should expedite the bill passage to reduce uncertainty. The NFIB's uncertainty index increased two points to 94.

The highest level of businesses indicating low inventory since August 2022 suggests upcoming supply shortages which could lead to price increases. Small businesses regained their optimism but they continue to watch Washington's volatile policies because they affect their financial performance.