Tariffs Drive Wedge Between Small Business and Big Tech

It was a strong quarter for America’s biggest companies — less so for many under-the-radar firms.

That’s according to a report Saturday (Aug. 2) by the Financial Times (FT), which charts a divide between the likes of tech giants such as Apple and Microsoft and big banks like J.P. Morgan, and other parts of corporate America struggling in the face of ongoing tariffs.

Almost two-thirds of S&P 500 companies have reported their numbers for the second quarter, with earnings for consumer staples and materials companies declining a respective 0.1% and 5% year over year, the FT said, citing FactSet data.

In all, 52% of S&P 500 companies to have released earnings showing a drop in profit margins, the report added, citing information from Société Générale.

Andrew Lapthorne, that bank’s global head of quantitative research, told the FT companies were reporting margin pressure even as their sales increased.

“That divergence suggests that their costs are going up but that companies aren’t yet passing this on [to consumers],” said Lapthorne.

The report adds that recent economic data indicates slowing growth outside of Silicon Valley and Wall Street. For example, the Bureau of Labor Statistics said the U.S. had added just 106,000 jobs from May to July, a steep drop from the 380,000 added in the prior three months. 

And last week’s GDP report showed the economy grew at a 1.1% annualized rate in the first half of the year, compared with 2.9% during the same period in 2024, per the FT’s calculations.

The report added that carmakers, airlines and appliance manufacturers were already feeling pressure and have seen the largest downward income revisions of the year.

Carmakers, airlines and companies manufacturing household durables such as refrigerators and washing machines were already under pressure, and have reported the largest downward revisions to net income for this year.

“This doesn’t come as that big of a surprise given their direct ties to tariffs,” Ryan Grabinski of Strategas Securities told the FT.

Research by PYMNTS Intelligence shows that America’s Main Street companies were struggling even before the tariffs were enacted, with their growth rate fading significantly between late 2024 and through the first quarter of the year.

“Historically, these workhorse businesses have often outperformed their larger peers, even bouncing back strongly after the initial pandemic shock through mid-2022, fueled by federal aid and surging consumer demand,” PYMNTS wrote last month.

“But over the four quarters ending in Q1 2025, Main Street businesses grew at a notably slower pace than the overall U.S. business index. While the overall business index rose 3.6%, Main Street managed only 2.4% growth.”

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