Trade War Impact on Middle Market Business Index Revealed by RSM

The RSM US Middle Market Business Index (MMBI), recently published by RSM US LLP in collaboration with the U.S. Chamber of Commerce, indicates a substantial drop in the business sentiment among middle market firms. The index sees a sharp decline from 143.2 to 124.5, the second largest quarter-over-quarter decrease observed in the decade-long history of the survey. This significant drop of 18.7 points reflects growing apprehensions regarding the rising costs of doing business amid uncertainties linked to extensive tariff impositions.

The data showcase a troubling trend: 20% of executives within the middle market report a decrease in capital expenditure. A notable 24% of these leaders highlighted a fall in gross revenues, while 26% experienced reduced net earnings. Joe Brusuelas, the chief economist at RSM US LLP, commented, "Although the overall reading remains above the crucial mark of 110, indicating economic growth, other components within the survey unveil drastic declines in new orders and newfound trepidations towards risk, reminiscent of the situations observed during the pandemic in 2020."

With less than half of the surveyed executives asserting that the economy is improving, it becomes evident that sentiments towards economic conditions are souring. The survey results further solidify expectations that economic activities will retrench until a new pricing structure for imported goods is established. Specifically, 44% of executives believe the economy has worsened, while only 35% observed improvements.

The downward trend in capital expenditure reinforces this bleak outlook. In the second quarter, only 43% of firms plan to increase their outlays, a sharp decline from 69% in the previous quarter. Hiring appears to be following a similar trajectory, with just 44% pursuing increased recruitment—down from 50% in the previous quarter. Furthermore, fewer firms are supporting recruitment initiatives with raised compensation, plummeting from 57% to 45% between quarters.

Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce, states, "The data from this index corroborate recent feedback from numerous small and medium-sized enterprises regarding ballooning costs and supply chain interruptions leading to irreparable impacts. The Chamber continuously advocates for tariff relief and is encouraged by negotiations toward new trade agreements aimed at creating opportunities for U.S. companies while benefiting American workers."

Pricing and Borrowing Dynamics Shift Amid Tariff Pressures

Current data showcase that with the effective tariff rates hitting 17.8%—a staggering increase from pre-tariff rates—77% of the respondents indicated they have encountered higher costs for essential inputs. RSM anticipates this inflation-tracking index will remain elevated, possibly reaching unprecedented highs since the survey's inception in 2015.

Given the constraints that small and medium-sized enterprises face in absorbing elevated costs, it comes as no surprise that 57% of surveyed executives resorted to raising prices in the present quarter, with 63% planning similar strategies in the upcoming six months. In a notable reflection of the financial tightening, the share of executives reporting increased borrowing has diminished from 40% to only 28%.

As firms navigate uncertainties regarding future operational costs, inventory strategies have gained prominence. Approximately 43% of survey participants disclosed they had piled up inventories during the current period, although only 42% anticipate continuing this trend over the next six months—indicating a general sentiment of insecurity about future pricing strategies and positioning.

To gauge these insights, the survey was administered to 412 middle-market executives across various sectors in the United States between April 7 and April 29, 2025.

The RSM US Middle Market Business Index Explanation

The MMBI, a collaboration between RSM US LLP and the U.S. Chamber of Commerce, stems from rigorous polling of middle-market firms conducted quarterly, starting from 2015. The index provides an accurate portrayal of the prevailing market climate and includes a mixture of quantitative and qualitative data reflecting trends that impact executive decisions.

Composed of responses from 1,600 middle-market executives, the MMBI aims to illustrate economic conditions by focusing on core questions relating to revenues, profits, and labor costs, alongside broader macroeconomic assessments. It is designed as a composite index based on diffusion indexes derived from a diverse set of survey inquiries, ultimately providing a bad-to-good analysis of market conditions—a reading exceeding 100 denotes expansion, while readings below 100 indicate contraction.

In conclusion, the current drop in the MMBI illustrates the precarious destiny of the middle market, which is increasingly cautious as it grapples with a turbulent economic environment punctuated by trade war anxieties, cost pressures, and shifting financial dynamics.