Economic Turmoil: Tariffs Hit Small Businesses Hard While CIOs Push Cloud Spending Beyond Limits

[00:00:02] It's Monday, April 14th, 2025, and I'm Dave Sobel for Things to Know Today. Tariffs up, sentiments down, why tech spend may be the next to stall. Small businesses are hurting and providers need to help more than ever. Politics meets cybersecurity as Trump's orders stir fear and silence. And CIOs blow past cloud budgets, giving providers a bigger seat at the table. This is the business of tech.

[00:00:30] With as fast as the market seems to change right now, a weekly check actually allows a bit of perspective. In March, U.S. consumer prices eased more than expected with the 12-month inflation rate dropping to 2.4 percent, below the predicted 2.6 percent. The core inflation rate, which excludes food and energy, rose by 2.8 percent, marking its lowest increase in four years. However, as one analyst noted, the March Consumer Price Index is being viewed as a non-profit.

[00:00:59] In light of the effects of tariffs. Because so far in April, consumer sentiment plummeted by 11 percent, according to a survey conducted by the University of Michigan, which involved about 400 consumers. This decline occurred alongside a surge in inflation expectations, which rose to 6.7 percent, the highest level since 1981. The survey indicated that both Republican and Democratic consumers reported deteriorating expectations regarding business conditions, personal

[00:01:29] finances and inflation. The significant drop in sentiment has been attributed to the economic consequences of President Trump's tariff policies, which have dampened optimism.

[00:01:39] And on Friday, the Trump administration exempted smartphones, computers and other electronics from the new tariffs imposed on Chinese goods. The decision reported by Bloomberg means that products like laptops, hard drives and memory chips will no longer be subject to the 125 percent additional tariff, although some pre-existing tariffs will still apply. Additionally, U.S. Customs and Border Protection has clarified that these exemptions extend to changes in small parcel shipping duties.

[00:02:09] This news follows the recent announcement of 90-day pause on tariff increases for most countries, while raising the total rate for Chinese imports to 145 percent. The Register reports that the Trump administration's trade tariffs are causing significant uncertainty in the IT industry, with many chief information officers pausing new projects due to concerns over budget disruptions.

[00:02:33] A recent report by investment bank Jeffries highlights that despite some temporary exemptions on electronics, tariffs remain higher than earlier this year. The report warns that the pause in tariffs does not eliminate business uncertainty, creating earnings risks across the sector. Major technology companies like HP and Apple may have suspended shipments from China due to the tariffs.

[00:02:56] Analysts point out that the reliance on China's manufacturing poses challenges, as many companies may have to defer new business decisions, impacting the industry's growth trajectory. Why do we care? When CIOs pause large IT projects, that slowdown trickles down to mid-market IT and SMBs. If enterprise demand pulls back, VARs and MSPs often feel it's second-hand via delayed refresh cycles, deferred cloud migrations, or frozen budgets.

[00:03:25] Regardless of CPI numbers, inflation expectations rising to 6.7 percent will impact purchasing behavior. Clients may start deferring spend out of fear, even if actual prices stay flat short-term. The unpredictable application of tariffs—impose, exempt, pause, then raise again—undermines confidence. This matters because providers often base contracts on multi-year timelines.

[00:03:51] You can't price in policy chaos without becoming uncompetitive. As uncertainty rises, clients need help making decisions more than executing them. Double down on your VCIO and strategic guidance offerings. Those that navigate well will gain trust and long-term loyalty. And watch SMB buyer behavior closely. Even if you're not directly affected today, you're one procurement freeze away from a budgetary cascade.

[00:04:20] Use QBRs and monthly check-ins to sense shifting sentiment early. Because, speaking of… With every new breach and threat that I cover, it's clear that cybersecurity isn't a luxury anymore. It's a necessity. That's where Huntress comes in. Their fully managed cybersecurity platform is built for every kind of business. Not just the 1%. Huntress seamlessly integrates their products and threat hunting team.

[00:04:49] Their EDR, ITDR, SIM, and security awareness training solutions are purposely built for their elite 24x7 security operations center to stop threats before anyone else even spots them. This potent combination of purpose-built cybersecurity and threat hunting expertise is one of the many reasons why G2 users have voted Huntress the number one rated EDR for growing businesses.

[00:05:14] To see what people-powered cybersecurity looks like, visit Huntress.com slash MSB Radio. So let's take a look at some of the reaction from customers. The National Federation of Independent Business, NFIB, has reported a significant decline in its Small Business Optimism Index for March 2025, which fell by 3.3 points to 97.4, dropping below the historical average of 98.

[00:05:42] Business owners are increasingly concerned about the ongoing policy changes and economic conditions, as highlighted by NFIB Chief Economist Bill Dunkelberg. The NFIB Uncertainty Index also decreased by 8 points, reflecting heightened apprehension among small business owners. Taxes emerged as the primary issue for 18% of owners, an increase since February, while labor quality remains a key concern for 19%.

[00:06:12] Expectations for improved business conditions declined sharply, with a net negative 21% anticipating better conditions. Furthermore, hiring trends reveal that 40% of owners have job openings they cannot fill, and access to credit is tightening, with 6% reporting that their last loan was more challenging to obtain. And small business owners are expressing significant concerns about the impact of new tariffs on their operations.

[00:06:39] A Reddit thread within the small business community revealed fears of increased import duties, with one owner reporting a staggering $2,483 in import fees for aluminum parts worth $3,380. Commenters suggested that future orders could experience price increases up to 156%. Many business owners, including those in retail and niche markets, voiced that these tariffs

[00:07:06] could potentially jeopardize their livelihoods, with one owner stating that costs could rise by 20% to 60%, which could absolutely destroy their business. Others discussed implementing tariff charge line items on receipts to explain the rising prices to customers, emphasizing that these increases result from government policies rather than profit-driven gouging. Examples include furniture brands like Hem and Industry West notifying customers of price hikes,

[00:07:36] while U.S.-based chipmaker Micron plans to impose extra charges on products due to new import duties. A sexual wellness company, Daim, announced a $5 surcharge on imports from China, emphasizing the impact of tariffs on its pricing strategy. As various industries, including food and clothing, express concern over rising operational costs, experts predict that everyday products such as coffee may soon see significant price increases.

[00:08:04] With many coffee beans sourced from Asian countries affected by tariffs, consumers could face higher prices for their morning brew. Retailers are preparing to clearly indicate how much of their pricing is influenced by these tariffs, making it evident that American consumers are likely to bear the brunt of the increased costs. Why do we care? From survey data to unfiltered Reddit threads, the through line is unmistakable.

[00:08:29] Small businesses, the core customers of most providers, are panicking. Clients are showing classic downturn behavior, cutting where they can, deferring spending, and holding back hiring. This isn't just perception, it's reflected in the NFIB data. The net negative 21% outlook on future conditions is the worst signal for forward-looking services demand.

[00:08:52] So, bundle audits, automation services, and workflow optimization with the explicit purpose of finding savings. Help clients justify your invoice. Add an educational component to your billing, brief memos, support videos, or short explainers that help clients understand what's changing and why your services still matter. And address tariff-related pressures head-on. Be the first to bring it up.

[00:09:19] And offer solutions like phasing projects, switching vendors, or renegotiating licensing models. MSPs and providers are only as resilient as their customers. With small businesses under immense stress from tariff-driven costs and financial uncertainty, providers must shift from growth mode to guidance mode and lead with empathy, clarity, and adaptability. President Trump signed executive orders targeting former officials from his administration,

[00:09:49] including Christopher Krebs and Miles Taylor, as well as the law firm Sussman Godfrey. The orders, signed last week, seek to investigate these individuals for their roles in opposing Trump's claims about the 2020 presidential election. Krebs, who oversaw election security, was dismissed by Trump after he refuted allegations of widespread fraud. The orders revoked the security clearances of both Krebs and Taylor and also direct investigations into their actions during Trump's presidency.

[00:10:18] Trump accused Krebs of treasonous conduct for defending the integrity of the election, while Taylor criticized the orders as an attack on dissent. Reuters reports that the cybersecurity industry has largely remained silent. After Trump took action against Sentinel-1, a prominent cybersecurity firm, by ordering the cancellation of security clearances for its executives. Despite reaching out to 36 cyber organizations, only one responded in support of Sentinel-1.

[00:10:47] The industry appears hesitant to speak out, with experts indicating that the risks of retaliation are too high. Trump's actions against Sentinel-1 are linked to the company's hiring of Krebs, the former director of the Cybersecurity and Infrastructure Security Agency. Following these events, Sentinel-1's share price dropped by 7%, reflecting growing concerns within the industry. The Cyber Threat Alliance was the only group to publicly denounce the White House actions, calling them an example of government overreach.

[00:11:17] As noted by a cybersecurity executive, the fear of retaliation looms large, leaving many in the industry reluctant to voice their opinions. Sentinel-1, in a published statement, emphasized its commitment to defending customers, enterprises, and governments against cyber threats using advanced artificial intelligence. The company, which has fewer than 10 employees under review, stated that it will cooperate with any government-mandated security clearance evaluation.

[00:11:42] Sentinel-1 reassures stakeholders that it does not foresee any material impact on its business operations. Why do we care? When a sitting president targets a cybersecurity firm for hiring a former official, it sets a dangerous precedent. Regardless of political affiliation, weaponizing government processes like security clearance revocation threatens the perception of neutrality in cybersecurity, an industry that relies on cross-sector trust and apolitical collaboration.

[00:12:11] Out of 36 cybersecurity organizations, only one, Cyber Threat Alliance, publicly spoke out. That's not just risk aversion. It shows how vulnerable the ecosystem is to political pressure. Don't wait for this to escalate. Evaluate exposures Sentinel-1 and other vendors tied to political controversy. Make sure you have contingency plans and Tier 2 vendor options. This is a high alert moment in cybersecurity, and a reminder that technology decisions are no longer politically neutral.

[00:12:40] If you're not scenario planning for political risk in your vendor stack, you are behind. A recent survey conducted by Azul, which included 300 chief information officers from organizations with over 500 employees in the U.S., revealed that 83% of respondents are spending, on average, 30% more on cloud infrastructure and applications than initially budgeted. Despite rising costs, CIOs are focusing on maximizing their cloud investments, with over

[00:13:08] half citing methods such as modernizing workloads and leveraging cost management tools to optimize spending. The survey indicates that 80% of participants reported cost savings from cloud adoption, with more than half receiving support from business leadership for continued spending. However, concerns regarding cloud expenditures were expressed by 43% of respondents, highlighting the crucial role managed service providers play in helping organizations enhance their cloud computing returns.

[00:13:34] With 71% of CIOs currently running over 60% of their workloads in the cloud, the trend toward increased cloud deployment is expected to continue, with Betty planning to elevate that figure to between 81% and 100% within the next five years. A recent survey by Channel Futures reveals that managed service providers are increasingly integrating security solutions into their offerings. In the fourth quarter of 2024, approximately 47% of managed service providers reported adding

[00:14:04] these services, marking a significant rise from the 20% who did so in the previous quarter. The survey, which included around 60 leaders in the field, also indicated that 41% incorporated artificial intelligence vendors during the same period. Managed security and AI solutions emerged as the top demands in 2024, with remote monitoring and management, software as a service, and managed backup and disaster recovery also seeing notable interest.

[00:14:30] Matt Kinsey, chief information security officer at IT Fusion, emphasized the need to differentiate from competitors as a primary motivation for the trend. Overall, 64% of surveyed providers noted growth in managed security solutions, with only 36% citing artificial intelligence as a significant contributor to business gains. Why do we care? Well, cloud spend is out of control. That's not a rounding error. It's systemic. And it's no longer just a FinOps problem.

[00:14:58] This overspend is now a strategic performance issue. Now, despite that, 80% still report net savings from cloud, showing the value proposition is intact, but mismanaged. That's the wedge MSPs can exploit, helping clients realize the promise of cloud without the budget bloat. As CIOs turn to cost management tools, they're often adding complexity. MSPs that act as integrators, not just resellers, are in a prime position to streamline tool

[00:15:26] sets, rationalize platforms, and reduce redundancy. So show clients where they're overpaying, where workloads are misaligned, and how to modernize. And bundle managed security into your core stack, not as an upsell, as the foundation. Remembering it already runs a risk of commoditization and does not act as your differentiator. This episode is supported by Comet Backup. As IT providers, we've all been there. The phone rings, your largest client is absolutely panicked.

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[00:16:25] Get $100 free credit when you sign up with the promo code MSPRADIO. Comet Backup. The backup solution that MSPs trust. Thanks for listening. Today is National Dolphin Day, National Donate-a-Book Day, and National Pecan Day. I'll be speaking on a webinar on April 22nd, that's next week, about inbound marketing in the AI era with the author of a new book. Link in the show notes and description to sign up and register now.

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