CFO optimism falls as tariffs, trade policy remain uncertain
The economic optimism index fell from 66.0 in Q4 2024 to 62.1 in Q1 2025, which the Fed banks said nearly erases the gains from a post-election jump. The CFO Survey elicits a respondent’s optimism about the overall U.S. economy and the financial prospects for their own company on a scale from 0 to 100.
CFOs’ optimism about their own firm’s financial prospects also dipped, the survey revealed. Nearly one-third of the 400 responding firms in Q1 2025 reported concerns about trade policy or tariffs — a sharp increase from Q4 2024. In addition, “uncertainty” was among the top five concerns for all respondents.
“Uncertainty and trade policy were clearly on the minds of CFOs in the first quarter CFO Survey,” said Sonya Ravindranath Waddell, vice president and economist with the Federal Reserve Bank of Richmond.
“Not only did almost one-third of respondents report concerns about tariffs, but those respondents had notably lower optimism, lower expectations for GDP growth, lower expectations for revenue and employment growth, and higher expectations for price growth in 2025.”
One commercial homebuilder surveyed noted that “tariffs are a major concern … the potential cost escalation of imported raw materials will negatively impact us.” Another reported that “tariffs … are causing price increases in steel, which will directly impact our gross profit.”
Some firms focused on the uncertainty around tariff policy and how it impacts corporate decision-making and overall prices. “Lumber tariffs … could help or hurt our company,” one respondent said. “Unpredictability … makes it very difficult to plan as a business.”
About 25% of firms reported that changes to trade policy would negatively impact their hiring and capital spending plans. This is leading almost 30% of firms to plan for diversifying supply chains, with 20% planning to move up purchases or find new domestic or foreign suppliers.
Aside from tariffs and trade policy, changes in regulatory policy seemed most likely to affect hiring and capital spending plans. A few firms reported altering plans due to changes in immigration or corporate tax policy.
But CFOs’ expectations for their own firm’s performance did not change considerably despite wide economic concerns. Internal optimism fell from 71.3 to 68.4, and employment growth expectations declined. But expectations for revenue growth, unit cost growth, wage growth and price growth were relatively steady from Q4 2024.
