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Profits are declining for small businesses in the Upper Midwest.

That’s according to the latest survey of business conditions in the region from the Federal Reserve Bank of Minneapolis. Respondents said government policies and rising input costs are some of their biggest challenges right now. 

And Haley Chinander, an analyst at the Minneapolis Federal Reserve, said tariffs have had a negative effect on most of the businesses that responded..

“The effects of tariffs people mentioned in the comments were often twofold,” she said. “Some businesses directly saw their prices on imports increase. Others said that the uncertainty with the policies was impacting demand and their planning for their business.”

The survey was conducted in January and early February, before the Supreme Court 

 many of the Trump Administration's tariffs — the president responded with 

“Many reported pretty sizable increases in wholesale prices and a smaller but notable increase in retail prices,” Chinander said. “These price increases remained a pretty big challenge for businesses, especially since many observed their customers were pulling back on spending a lot.”

The Minneapolis Fed conducts the survey about business conditions every six months and reached out to more than a thousand firms from Minnesota, Montana, both Dakotas, and parts of Michigan and Wisconsin. Most respondents were small businesses with fewer than 250 employees. 

Respondents’ answers were varied based on the size of their business. About 10 percent of businesses with fewer than 10 employees had to cut wages last year, for example, while no businesses with more than 250 employees reported doing so. 

“Larger firms are actively hiring workers at higher rates than smaller firms, and their staff expectations (for the next six months) were more positive,” she said. 

The survey also captured geographical differences. For instance, companies in the Twin Cities had worse expectations for the first quarter of this year than companies in Greater Minnesota. Chinander said that may be due to the surge in immigration enforcement, but that took place after the survey questions were finalized. 

“We did receive a lot of comments showing that people were experiencing things like really heightened staff absences and a big drop in customer demand that was following this change in enforcement,” she said.

“We also saw a lot of businesses saying that they were temporarily closing or reducing their hours, and some mentioned that they were probably going to close permanently,” she added. 

Looking ahead, respondents were generally more negative about the next six months than they were last year, and smaller businesses were more pessimistic than larger ones.

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Harshawn Ratanpal

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A survey of businesses by the Minneapolis Fed shows profits are down across the Upper Midwest and many blame government policies such as tariffs.

Mpls. Fed survey: Upper Midwest businesses report falling profits, tariff uncertainty

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