66% of SMEs concerned about trade war – Linked Finance

The turmoil of high US tariff announcements – and subsequent pauses – has increased uncertainty among Irish small and medium sized businesses (SMEs).

That is according to a new business confidence survey by Linked Finance, which shows that the record high in optimism levels seen among Irish small and medium sized businesses (SMEs) several months ago has dropped back to more average levels.

Linked Finance’s latest SME Tracker shows that business optimism amongst all SMEs reached 67% at the end of the fourth quarter of last year, but this dropped back to a more average 62% for the first quarter of 2025.

It noted that while there has been no “cliff edge” fall in business activities, they remain in slightly negative territory year-on-year.

SMEs surveyed for the sentiment tracker reported a drop in business of 5% at end of the first quarter of 2025, compared to a dip of 3% for the same time last year.

The survey said there was a significant upward spike in activities by exporters last quarter, likely due to a surge in orders to fill warehouses ahead of signalled changes to trade and new tariffs announced by US President Donald Trump on April 2.

36% of exporting SMEs saw higher business activity in the first quarter of this year, compared to 25% of SMEs focused on the indigenous sector.

But exporting SMEs were the most concerned about the threat of US tariffs, with 87% either very concerned, or somewhat concerned. On average, 66% of businesses are concerned about a global trade war, with 80% of those with 10 or more employees reporting that they are concerned.

Today’s survey also noted that concerns around a potential trade war are higher among the larger Irish SMEs surveyed, business based outside Dublin, and those in the retail/wholesale sector. One-in-four are very concerned about the issue, post the initial announcement of trade tariffs in the US.

But micro-businesses (which have one to three employees) have posted their lowest level of concern since Covid closed doors in 2020, with almost seven in 10 confident of the same, or a higher level, of business activity this quarter.

While employment levels remain strong, businesses based in Dublin are driving jobs growth, while those based outside the capital are in neutral territory, Linked Finance added.

Niall O’Grady, the chief executive of Linked Finance, said that geopolitical turbulence has caused a rapid return to long term average levels of business confidence, with an uncertain outlook in the medium term.

“While there has been a dip in optimism, and that gap between businesses in the capital and outside the capital continues to exist, Irish SMEs have shown resilience in the past – given the many challenges to trade in recent years – including Brexit and Covid,” he said.

“Micro-businesses only saw a small decline in optimism, and price rises are pulling back, which is good for customers,” he said.

He also said that given the turbulence and uncertainty experienced since the start of the year, he was not surprised by some of these results.

“But overall, Irish SMEs are weathering the challenges well. They are understandably concerned about the macro environment, but they are sourcing new markets – which is something many SMEs have been adept at – and may focus on more in the long term,” he added.