The implications of a change in landscape
Tariffs
Tariff announcements have ignited an international response, increasing market volatility and limiting material growth. With the tariff environment remaining fluid, the lack of certainty in import prices continues to require careful consideration.
Manufacturers are presented with the need to bring production back to the states to get their cost structure in line, but this takes time. While we’re seeing higher input and material costs, businesses still have an opportunity to take advantage of this changing environment through competitive positioning and tactful adaptation strategies.
The Supreme Court’s decision to strike down IEEPA tariffs has created implications for companies with import and supply chain exposure, allowing businesses to pursue potential refunds. “Thousands of businesses have already filed claims, requesting the return of the money they paid in tariffs, which was expected to offset the tax cuts put in place by the OBBBA,” said Turner.
Section 122 tariffs must be implemented uniformly and do not allow negotiation agreements for carveouts, as previously occurred with IEEPA duties. The 150-day limit on Section 122 tariffs gives the administration time to do the work needed to implement more permanent tariffs under other Trade Acts.
The job market
Changes in the employment market are another area to watch closely. After last year’s DOGE cuts, certain industries are feeling the impact. The manufacturing and industrial sectors are experiencing a skills mismatch, while health care is lacking skilled individuals at specific levels. “Not only have we seen a skills gap, we’ve seen some structural changes that are indicative of a slowing economy, as well as a change in labor force participation,” explained Turner.
Pointing to both immigration policy and a demographic shift, Turner notes we’re witnessing a persistent decline of available workers. “We don’t have as many people participating in the labor force on a percentage basis as we did at the beginning of 2025. And the size of the labor force, which usually grows month by month, year by year, has been stagnant.”
Meanwhile, the February 2026 employment report showed significant losses, primarily concentrated in the leisure and hospitality and health care sectors, resulting in 69,000 fewer jobs than previously reported. Health care strikes in California and New York have also had an impact, shrinking payrolls in the sector by 46,000, half of the total loss in employment. “While those positions will be restored once those conflicts are resolved, the weak report and poor revisions to previous months splashed cold water on hopes the labor market was firming,” said Turner.
The One Big Beautiful Bill
The legislation provides a host of tax benefits for businesses, including full expensing of property acquired after January 19, 2025, more generous rules for business interest deductions, and greater deductions for the purchase of equipment and software. The extension of 100% bonus depreciation for new factories and equipment effectively accelerates write-offs and lowers taxable income, freeing up capital for reinvestment, though these business benefits come with some economic repercussions.
The most significant impact for businesses is a change in tax rates. After the Tax Cuts and Jobs Act was set to expire at the end of 2025, this bill extended the tax cuts for an additional 10 years. Businesses on the margin will experience lower tax rates, making it essential for companies to assess their structure and consider how restructuring to a different corporate classification would impact their tax obligations. Consulting a tax advisor is key.
From a broader economic perspective, the One Big Beautiful Bill reduces government revenue at a time when national debt is rising, intensifying deficit issues. As the federal government spends more of its revenue on debt service, it spends less on business support programs and government spending. “While government spending is not the biggest driver of our economy, and consumer spending remains steady, the government presented with more debt service means it’s less able to spur consumer growth through stimulus or to aid economic growth,” Turner explained.
The impact of incremental changes
In an effort not to scare customers away, many retailers have avoided passing price increases on to consumers. Turner predicts that price increases may be metered out gradually. “That will alleviate some of the margin pressure for businesses, but it exacerbates some of the inflationary pressures for consumers, which could cause a drop-off in consumer activity,” he said.
These gradual changes also extend to rate cuts, which are expected to remain fairly stagnant until later in 2026. “I anticipate the cutting path to be a continuation throughout the year, so rates will be coming down, but they’re going to do so gradually,” explained Turner. “Unless we fall into some sort of recession, we’re likely to see the Fed continue to piece out little 25 basis point cuts multiple times over the next year or so.”
When the only certainty is uncertainty
Uncertainty remains the biggest challenge for businesses. “We still have questions around prices, rising inflationary pressure, particularly as it relates to the consumer, and if and when that’s going to have any sort of impact on consumer spending,” said Turner. “I think employment markets might continue to stagnate slightly, with fewer job openings and continued labor force issues. Companies that can successfully navigate this will be well-positioned.”
The effect on access to credit
With lower tax rates and lending rates slowly coming down, the general outlook from the business community is that conditions are improving on a go-forward basis. “I think that’s more than just hopeful thinking,” said Turner. “I think that’s realistic thinking. Businesses tend to do a little better than consumers at adapting to changes in the environment.”
While borrowing has become more expensive over the past few years, it’s not egregiously so, and businesses have adapted to market fluctuations when weighing the cost of capital. And unlike previous financial crises, lenders have been holding the line from a lending standard perspective, making it easier for businesses to decide if acquiring capital is feasible.
This holds true for stock market volatility as well. “Just having volatility is a normal condition of the market,” Turner explained. “Those fluctuations shouldn’t have too much of an impact on the underlying health of companies. For medium-sized businesses, I would not be concerned with volatility in the stock market changing things from a funding perspective.”
Adaptability brings opportunity
Similar to what we saw in 2025, mid-market companies that are proactive will be able to adapt, uncovering potential opportunities this year. With careful planning, strong financial partnerships, and a focus on resilience, companies can effectively maneuver through market conditions.
Connect with your relationship manager at Wintrust for tailored financial solutions to position your business for success.
