CEOs consider slashing benefit budgets amid tariff concerns

CEOs are feeling a lack of confidence in their ability to guide their businesses though the financial storms caused by tariffs and other economic challenges. What will this mean for benefit budgets in the coming months? 

According to the quarterly Vistage CEO Confidence Index, in the first quarter of 2025, CEO confidence among small and midsize business leaders dropped sharply: The index fell by a historic 22 points — from 100.8 in the last quarter of 2024 to 78.5 in the first quarter of this year. This marks a significant shift in sentiment driven by inflation concerns and the mounting impact of tariffs. 

"The high confidence in the previous quarter was likely driven by optimism about what the new administration might accomplish," Joe Galvin, Vistage's chief research officer, said in a release. "The current reading reflects the reality of ongoing economic challenges."

Tariffs' impact on small businesses looms large

Tariffs emerged as a central concern for SMBs, with 69% of CEOs reporting that trade and tariff policy changes are negatively affecting their businesses, according to the report. The financial pressure created by tariffs is compounding other cost challenges, such as rising wages and a tight labor market. 

Read more: What Trump tariffs mean for hiring and benefits

"Price increases are going to be critical as there will be a continued margin squeeze caused by tariffs, the labor market and wage increases," Lauren Saidel-Baker, an economist at ITR Economics, said in the release. "Margin is the critical differentiator of winners and losers going forward."

These pressures are having a direct and growing impact on employee benefit costs. As margins tighten, businesses are being forced to scrutinize every expense — including compensation and benefits. Many companies are exploring cost-saving strategies such as reducing benefit offerings, increasing employee contributions to healthcare plans, or delaying enhancements to retirement and wellness programs, Vistage's data found.  

Read more: Voya reveals 'severe impact' on retirement savings due to tariffs 

While 45% of CEOs still plan to add personnel this year, 14% anticipate cutting back on hiring — marking one of the few times this figure has reached such levels outside of major economic downturns. This hiring restraint could further signal reduced investment in total compensation packages, including benefits.

To counterbalance cost increases, 44% of CEOs have already raised prices in 2025, with 51% planning additional hikes within the next three months. Among those, 13% expect to raise prices by more than 10%. Simultaneously, businesses are seeking operational efficiencies through technology, with 70% of CEOs and 61% of leadership teams actively integrating AI into their operations.

What's next in 2025

This drop in CEO confidence and the actions leaders are anticipating needing to take in the coming months reveals a cautious approach from leaders navigating a challenging economic landscape. 

Tariffs are not only straining margins but are also forcing difficult decisions around workforce spending, including adjustments to employee benefit costs. As businesses work to protect profitability, benefit programs — often one of the most substantial line items in a company's budget — are increasingly under pressure.