The perfect storm: Macroeconomics, markets and money

This year, SMEs have been simultaneously squeezed by cost pressures and tighter financing, while escalating trade tensions and tariffs have hit hard. 

Across our global network, we’ve seen how these challenges have played out differently in every region and sector. 

But amid the disruption, one skill stands out: adaptability.  

Successful SMEs are those that have transformed these challenges into a catalyst for smarter, bolder and more strategic growth. 

In the first of a two-part series looking back at 2025, we speak to leaders from across our network to uncover how financing conditions, global trade friction and geopolitical shifts have collided to redefine the SME landscape this year. 

Escalating trade tensions, tariffs and geopolitical shifts dominated headlines this year. 

In the US, uncertainty ruled the day.  

“2025 was simply unprecedented. Businesses scrambled to understand tariff changes, immigration policy shifts and federal cost-cutting,” explains Fred Kostecki, St. Louis managing partner of US network member firm RubinBrown. 

“The impact was, at first, paralysing, as SMEs struggled to understand where policies would land. Then came the rush to stockpile goods ahead of tariff deadlines. Margins took a hit, and some sectors saw shrinking workforces due to stricter immigration policies.” 

Canada faced similar cross-border shocks.  

Ben Lloyd, CEO of Baker Tilly in Canada, notes: “Ongoing cost pressures, supply chain fractures and tariff uncertainty forced SMEs to rethink the fundamentals. Leaders who embraced digital readiness, data-driven decisions and talent upskilling surged ahead. Volatility became a proving ground for innovation.” 

Across Latin America, political shifts created a mixed picture.  

“Argentina’s midterms provided breathing room for long-term planning, while Mexico’s judicial overhaul injected fresh uncertainty,” says Manuel Aguilar, managing partner in Baker Tilly in Mexico.  

“Bolivia and Uruguay both had leadership changes, and Colombia and Venezuela faced increased US pressure to curb drug trafficking, all of which affected regional stability.” 

Europe also faced a complex mix of pressures. 

French SMEs were walking a tightrope, protecting profitability while investing for the future amid ongoing economic and political uncertainty.  

“Businesses are pushing ahead on digital transformation and boosting visibility, all while managing tight budgets and recruitment challenges,” says Laure Mounier, group CEO of Baker Tilly in France.  

In Germany, SMEs faced a perfect storm: economic uncertainty from tariffs, rising bureaucracy and energy costs, rapid digitalisation through artificial intelligence (AI) and sector specific talent shortages. 

“Traditional industries like automotive, steel and chemicals came under pressure from global competition, digital transformation and decarbonisation,” says Ralf Groening, managing partner of Baker Tilly in Germany. 

India’s SMEs battled a fast-moving mix of cash, compliance, talent and technology pressures, explains Ajay Sethi, managing partner of Baker Tilly ASA in India. 

“Despite booming demand and strong policy support, SMEs faced a tough year on four fronts: tightening cash flow as access to credit lagged behind needs; rising compliance costs as India aligned governance to global standards; a growing talent crunch, especially in technology and manufacturing roles; and a widening digital divide that left many firms using digital payments but struggling to adopt deeper transformation tools.” 

Amid rising interest rates, inflation and tighter lending conditions, many SMEs still found ways to adapt, innovate and pursue growth. 

After years of ultra-low borrowing costs, French SMEs were faced with rising rates and inflation says Ms Mounier.  

“Financing became tougher, costlier and slower, forcing French businesses to prioritise ruthlessly and pause non-essential investments. 

“Cash flow management emerged as a top priority: companies are tightening working capital, protecting margins and pushing hard on EBITDA discipline. At the same time, interest in AI-driven tools and treasury management systems is surging, as firms seek smarter, faster ways to stay liquid.” 

German SMEs faced a similar squeeze, compounded by energy costs, wage-driven inflation and export restrictions. Businesses had to strike a delicate balance between cutting costs and investing enough to remain competitive, explains Mr Groening.  

“Despite the pressures, some firms turned adversity into advantage by investing in efficiency, innovation and market diversification to offset rising costs. Risk-adjusted planning and incremental investment remained central to strategies.” 

Polish SMEs experienced a rare duality: cash flow stress and growth potential co-existing.  

“Inflation cooled by mid-year, interest rates dropped and banks eased lending standards. These factors unlocked working capital and investment credit, allowing SMEs to fund capex and pursue strategic mergers and acquisitions,” says Wojciech Sztuba, managing partner of network member firm TPA Poland.  

“Operating costs continued to rise due to energy prices and wage hikes, but cheaper financing and long-running guarantee schemes helped sustain growth opportunities.” 

For Indian SMEs, cash flow pressure from delayed payments has been one of the biggest risks, says Mr Sethi. Yet growth momentum is among the strongest globally. 

“SMEs are capitalising on expanding opportunities in IT, renewables, mobility, infrastructure, capital goods and electronics. Robust domestic demand, rising government orders, cooling inflation and supportive industrial policies are enabling rapid scaling, even as payment delays persist. Many firms are using this window to build capacity, expand supply capabilities and deepen their role in India’s fast-growing sectors.” 

Across Africa, the challenge has been less about financing costs and more about resource scarcity, says Chakib Zaari, managing partner at Baker Tilly in Morocco.   

“SMEs are struggling to secure materials, and liquidity remains tight in many countries. There has been some improvement in those nations enforcing faster supplier payment laws, but day-to-day operations are still difficult for many businesses.  

“Creative approaches to cash management and local partnerships are critical to keeping operations afloat.” 

Across Latin America, inflation mainly stabilised, with Argentina showing encouraging progress. Venezuela remained the outlier, with inflation still destabilising business conditions. 

“Financing remains expensive across the region,” says Mr Aguilar.  

“SMEs are focused on cash flow, but high borrowing costs continue to limit opportunities for strategic growth.” 

And the picture varies by country.  

“Argentina has boosted GDP, reduced inflation and controlled foreign exchange volatility, creating a more stable environment for businesses. In contrast, Mexico’s lack of economic growth is hitting nearly every local sector, leaving SMEs navigating a far more challenging landscape,” says Mr Aguilar.  

US SMEs faced stubbornly high interest rates and uncertainty around tariffs, which led to more cautious capital spending.  

“Yes, margins are thinner and inventory stockpiling has increased, but fundamentals remain solid. Cash flow isn’t collapsing, but businesses are operating with a heightened focus on liquidity and risk mitigation,” notes Mr Kostecki.  

Canada tells a more optimistic story according to Mr Lloyd.  

“While cross-border tariffs and rising costs have pressured cash flow, digitally mature SMEs with flexible financing strategies have turned volatility into opportunity. By leveraging automation, innovative funding models and market agility, these businesses are expanding into new niches and reinvesting to build capability and resilience.” 

Trade upheaval and supply chain disruption this year demanded faster decisions and sharper resilience. 

For German SMEs, especially those in the automotive sector, persistent supply chain disruption has hit hard.   

“Semiconductor shortages, soaring raw material costs and geopolitical bottlenecks have affected both production and margins. Smaller suppliers have been hit hardest, forced to absorb rising costs they can’t pass on,” explains Mr Groening. 

“And as global supply chains pivot away from Asia and pressure mounts for nearshoring, SMEs are being pushed to overhaul sourcing strategies quickly, often without the capital or capacity to keep up. Some are leaning on digital tools and regional sourcing, but the overall pain point is large-scale operational disruption.” 

Canadian SMEs are fighting a different battle. Here, the disruptor isn’t missing parts, its tariff whiplash, says Mr Lloyd.  

“Shifting duties and unpredictable trade policies have injected uncertainty into everything from input costs to pricing decisions. Cash flow forecasting has become guesswork, long-term investment is stalling, and smaller firms have been forced into defensive mode. 

“In Canada, uncertainty itself has become the biggest supply chain risk.” 

Across Latin America, physical supply chain disruptions have been brief and manageable, but the strategic fallout is real.  

“With shifting trade alignments and fluctuating costs, the long-term planning horizon has shrunk dramatically. SMEs are operating, but not with confidence,” says Mr Aguilar. 

Poland adds yet another angle to the story: weak global demand and regional frictions.  

“Manufacturing Purchasing Managers' Index (PMI) stayed below 50 for much of 2025, exports faced soft external demand, and a strong zloty squeezed competitiveness in several sectors,” says Dr Sztuba. 

“SMEs walked a fine line, pulling back on capital expenditure tied to euro-area demand while simultaneously pushing into new sales channels and product lines. And despite the uncertainty, bank surveys showed rising SME demand for both investment and working-capital loans, signalling ambition beneath the caution.” 

Despite geopolitical tensions, trade barriers and rising domestic costs dampening internationalisation across Europe this year, Germany stands out.  

“German SMEs are seizing opportunities in new markets, diversifying business models and pushing ahead globally to stay competitive. Selective diversification outside Europe continues, but the real story is strategic expansion, not withdrawal,” says Mr Groening. 

Across Latin America, and Mexico in particular, the lack of domestic economic growth is pushing companies outward, explains Mr Aguilar.  

“Technology-based firms and startups already default to regional and/or international strategies, but now even traditional SMEs are increasingly looking abroad, with the US, Spain and other territories within Latin America being the main targets. For many, international expansion isn’t optional, it’s the only path to scale.” 

India is moving in a similar direction, but faster. 

SMEs are rapidly diversifying in response to geopolitical shifts, policy support and softening western demand amid rising tariffs, says Mr Sethi.  

“Markets such as the UAE, China, Vietnam, Japan and Nigeria are gaining traction. New trade agreements and digital tools are enabling firms to reach foreign buyers directly, while the Export Promotion Mission is boosting trade finance, branding and global outreach, accelerating their international footprint.”  

Africa, however, tells a different story. Here, domestic consolidation has been the priority. 

“Businesses are strengthening domestic supply chains, building local partnerships and focusing on operational stability before looking outward,” notes Mr Zaari. 

Canadian SMEs face a tougher dilemma.  

Tariff volatility and shifting trade policies have disrupted planning, inflated costs and created a cloud of uncertainty around cross-border commerce.  

Mr Lloyd notes: “This unpredictability makes long-term investment risky and cash flow forecasting difficult. Smaller firms lacking big-company buffers are responding cautiously – slowing hiring, delaying expansion and approaching global markets with far more hesitation. 

“Yet, another narrative is emerging among high performers, where diversification is the new default. Digitally mature SMEs are expanding globally and online, mixing goods, services and innovation to break free from North American volatility.” 

It’s not just macroeconomics that SMEs have been navigating this year.  

Artificial intelligence, talent and the skills landscape are evolving fast, leaving a real mark on businesses.  

In the second part of this series, we’ll explore how these forces have redefined what it takes for SMEs to compete and grow.