Are we going into a recession? Are we already in one? What will be the impact of Trump’s tariffs? Here are some observations.
Recently, I’ve noticed more companies that I deal with are struggling. Some a little and some a lot. I see this typically in the monthly financial reviews that are the cornerstone of my practice. Our monthly meetings typically start with a review of the most recent month’s activities, the year-to-date performance, and results compared to budgets.
I’m also seeing this in new clients and other businesspeople I talk with. New clients are a skewed sample as people often seek me out when they are facing challenges.
What I’m seeing are businesses that are struggling but generally not in a dire situation. Almost everyone is falling short of meeting their profit goals, although some are meeting their sales goals. The sense is there is pricing pressure from the marketplace, especially in construction, and costs are increasing while there is pushback if one tries to pass through the price increases.
Uncertainty is constant currently with the administration and radical changes being implemented, delayed, changed, and, well, you know. It is hard to do any planning.
Tariffs have been filling the news for months but have only recently started to take effect. On August 25th, I got my first notice that something I ordered from Europe was “on hold.” Shipments under a small dollar amount, I think it was $800, aren’t being processed by some European postal services. In this case, it was Spain, and that they would ship my goods when the situation became clear. This is likely to happen millions of times a day.
Another phenomenon I’ve noticed is companies that were struggling five years ago but were then propped up by the Covid era government support such as PPP loans and Employee Retention Tax Credits. Government warned that many of the ERTC companies were scams, but the clients I work with got their money. But now the government money has stopped and some of these companies still have their problems. The money delayed but did not solve problems for these companies. So where does that leave us? My sense is that the economy overall is doing okay but it is fragile. It seems that results are disappointing but okay. At the same time, I don’t see individual companies or the economy in general in a position to withstand an economic shock should one come. There just doesn’t seem to be the reserves and robustness I saw two-to-four years ago. My fear is that it wouldn’t take much to push us over the edge. I hope I’m wrong or that the push never comes.
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