Haslam College of Business - Tennessee Business Leaders Feel Tariff Impact but Stay Optimistic About Economy

Tennessee business leaders say they are feeling the effects of tariffs. However, according to a new survey from the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville, Haslam College of Business, most still view the likelihood of a U.S. recession is low and rate the Tennessee’s economy more favorably than the national outlook over the next year.

About a quarter of employers who responded to the Boyd Center’s summer 2025 Tennessee Business Leaders Survey, administered in August 2025, said tariffs have affected their business a lot, while almost 50 percent said they have felt a little effect from tariffs. Nearly half (44.2 percent) said they are passing on some of or all tariff costs to customers.

In an earlier survey conducted in January 2025, only 5 percent of respondents thought the chance of recession was over 50 percent. In the newest survey last month, that figure rose to nearly 19 percent. However, over half of business leaders remain optimistic that the chance of recession this year is less than 25 percent.

This optimistic outlook extends to the Tennessee economy, but not to the nation. About 44 percent of respondents said the national economy is worse than it was last year, and 43.3 percent of business leaders expect the U.S. economy to decline over the next year. However, nearly two-thirds of employers believe Tennessee’s economy will outperform that of the U.S. over the next year, attributing it to business investments and government leadership in the state.

According to Don Bruce, the director of the Boyd Center and Boyd Distinguished Professor, this optimistic attitude toward Tennessee’s economy speaks to the business culture in the state.

“Despite talk of tariffs and recession, it’s good to see that these industry leaders have a sunnier outlook for Tennessee,” he said. “The state’s efforts to create a robust arena for conducting business seem to be paying off.”

Over 70 percent of business leaders said Tennessee is headed in the right direction, and nearly two-thirds said the state could improve its business climate even more through infrastructure development. About half of respondents identified enhanced workforce development and energy infrastructure as additional areas for improvement.

“Adverse economic conditions” is what many respondents cited as the top challenge Tennessee businesses face, with 45 percent of survey participants listing it among their top three concerns. About 35 percent also cited U.S. trade agreements as a concern, bringing it into the top three for the first time. Almost a third of business leaders continue to list government regulation and global political instability, as well.

About 60 percent of Tennessee business leaders continue to report an insufficient supply of appropriately trained workers in the state labor force, and employers identified the top three missing skills or attributes as work ethic (66.2 percent), initiative (43.9 percent) and being realistic about compensation (43.2 percent).

The number of business leaders citing problems attracting and retaining employees is down from almost half in the winter survey to about a third in the summer survey. Almost half of employers surveyed attribute this to the cost of housing, and a third also cited the cost of childcare services—“our labor force is increasingly desperate for childcare and housing resources,” one respondent added. While east and middle Tennessee business leaders were most concerned with housing and childcare services, 40 percent of west Tennessee employers listed the quality of local schools as their top concern.

The full set of survey responses is available on the Boyd Center website.

About the Boyd Center for Business and Economic Research

The Boyd Center, located in Haslam, conducted the survey between July 31 and August 22, gathering responses from business leaders across Tennessee. Respondents represented a broad sample of businesses across all industries, ranging in size from fewer than 50 employees to more than 5,000.

CONTACT

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Erin Hatfield, communications and events specialist, 865-974-6086. ehatfie1@utk.edu