Optimism among chief financial officers (CFOs) has declined in the first quarter of the year as rising tariff risks and economic uncertainty cast a shadow over business expectations.
A new survey conducted by two Federal Reserve banks and Duke University found that optimism, which had surged following President Donald Trump’s election, is now weakening.
Concerns over trade policies and inflationary pressures are driving a more cautious outlook, impacting corporate spending, investment decisions, and economic growth projections.
According to the survey, the average CFO optimism score, measured on a scale of 0 to 100, fell from a pandemic-era high of 66 at the end of last year to 62.1 in the current quarter.
The index had previously plunged to 50.5 during a period of inflationary pressure but later stabilized around 60 before surging by six points after Trump’s election victory.
However, recent developments, particularly uncertainty surrounding tariffs and trade policies, have dampened enthusiasm.
Tariff concerns weigh on key industries
Among various sectors, only construction reported a slight increase in optimism, rising from 66.6 to 68.
In contrast, manufacturing—a sector Trump has vowed to support through tariffs on imports—saw a notable decline, with CFO sentiment dropping from 66.6 to 61.6.
This suggests that businesses are grappling with the potential economic consequences of new trade policies, which could disrupt supply chains and increase costs.
The decline in CFO sentiment aligns with broader economic indicators. The survey found that executives now anticipate slower growth and higher prices compared to their outlook at the end of last year.
This is in line with a recent Conference Board survey, which showed a drop in consumer sentiment to a four-year low in March, as households increasingly fear both a recession and rising inflation.
Policy uncertainty dampens business confidence
Sonya Ravindranath Waddell, vice president and economist at the Federal Reserve Bank of Richmond, highlighted the impact of trade policy concerns on corporate outlooks.
“Uncertainty and trade policy were clearly on the minds of CFOs,” Waddell said.
“Nearly one-third of respondents expressed concerns about tariffs, and those respondents showed significantly lower optimism, reduced expectations for GDP growth, weaker revenue and employment forecasts, and higher price growth expectations for 2025.”
The findings suggest that despite initial optimism following Trump’s election, businesses are becoming increasingly wary of potential economic headwinds.
CFOs are particularly concerned about how new tariffs and trade restrictions could affect supply chains, production costs, and overall profitability.
With trade tensions escalating and inflationary pressures persisting, the coming months will be critical for business confidence.
The Federal Reserve’s interest rate policies, upcoming regulatory decisions, and potential shifts in trade negotiations will all play a key role in shaping economic expectations.
For now, the declining optimism among CFOs signals growing caution in corporate America, potentially leading to restrained investment and hiring in the months ahead.
As businesses navigate these uncertainties, financial markets and policymakers will be watching closely for signs of further economic slowdown.
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