Main Street optimism dropped as U.S.-China trade tensions ramped up

Data: NFIB; Chart: Axios VisualsSmall business optimism declined for the fourth straight month in April, with the fewest Main Street firms since 2020 planning investments to expand business.Why it matters: The findings predate the trade war de-escalation with China, but the ongoing sentiment slump is the freshest warning about the economic risks associated with sky-high tariffs and broader uncertainty.What they're saying: "Very few small businesses export their goods and services, but millions acquire imported goods as inputs to their operations and those supply chains are currently at risk," economists at the National Federation of Independent Business, the small business lobbying group that conducts the monthly survey, said in a release."Tariff policy is suddenly and dramatically changing relative prices (costs), and relative prices drive all decisions."By the numbers: The NFIB's small business optimism index fell by almost 2 points last month, to the lowest since October.The overall index, however, masks some of the significant deterioration in underlying expectations among small business owners.Roughly 18% of firms plan capital expenditures — spending on new equipment or buildings, for example — in the next six months, the smallest share since April 2020.Fewer owners anticipated better business conditions down the line, with the smallest share of firms reporting as much since October.The NFIB reported a "historically low" number of owners who say now is a good time to expand their business. Those who say it is not a good time to expand business overwhelmingly cite "economic conditions" as the reason.The intrigue: Optimism among small businesses shot up after the election, though those gains have vanished.The April results capture the "Liberation Day" tariffs and subsequent pause on all countries, except China.Treasury reported a record-breaking $16 billion collected in tariff revenue last month, up from the $8.7 billion collected in March.Between the lines: Main Street's reported concerns are largely based on downbeat expectations about the future — a sign that the temporary deal to significantly reduce tariffs on Chinese goods would be welcomed by small businesses.There were bright spots in survey questions rooted in the current state of their business.For instance, many businesses were still looking to hire workers last month. The net share of owners reporting higher nominal sales in the last quarter rose, though the NFIB cautions that the number of businesses reporting higher sales remains in "recession territory."

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