Mid-Market Leaders Prioritize Cost and Tech
Business leaders in the middle market are prioritizing cost management, talent strategy, and technology investment in the current economic environment. A Q1 2026 Mid-Market Pulse Report from CBIZ indicates these areas are the primary focus for executives as they navigate challenges and plan for growth.
- Geopolitical tensions are embedding tariffs as a long-term cost factor, with the average effective U.S. tariff rate remaining near 17%. This is forcing manufacturers to continuously optimize supply chains around country of origin rules and supplier geography. China's dominance in critical minerals like rare earths (controlling over 90% of refining) and the "weaponization of the supply chain" are creating significant sourcing risks for electronics, defense, and EV sectors. - Regulatory pressures are intensifying, with OSHA moving to finalize a federal heat illness prevention standard that will mandate written safety plans and monitoring for both indoor and outdoor manufacturing environments. Additionally, the EPA's designation of certain PFAS as hazardous substances is creating new cleanup liabilities and reporting obligations for manufacturers under CERCLA. - The trend of reshoring and nearshoring is accelerating, with 74% of manufacturers moving operations to build regional supply chains that are less exposed to global disruptions. This shift is driven by a desire to bring manufacturing closer to engineering capabilities and reduce risks associated with tariffs and transportation volatility. - The SEC is increasing its focus on disclosures related to AI, which has become the seventh most commented-on area in filings. While the SEC's proposed climate change disclosure rules will not go into effect, investor and state-level pressures, such as those in California, continue to drive voluntary climate-related reporting. - Internal audit functions are increasingly adopting co-sourcing models to gain access to specialized skills in areas like cybersecurity and data analytics without fully outsourcing the function. This allows internal teams to retain strategic control while leveraging external expertise to address complex and technical risk areas. - As manufacturers adopt Industry 4.0 technologies, internal auditors are shifting their focus from financial record audits to assessing operational efficiencies, risk management, and governance. There is a growing need for auditors with skills in relationship building, negotiation, and critical thinking to provide strategic advice on emerging technological risks. - Trade publications highlight that supply chain volatility is now a constant, forcing a shift from reactive problem-solving to building predictive resilience. According to a Thomson Reuters report, 68% of trade professionals now cite supply chain management as their top strategic priority, nearly double the percentage from the previous year. - Despite tariffs aimed at reducing the U.S. trade deficit, the goods shortfall reached a record $1.24 trillion in 2025, driven by imports of tech components. While the goods trade deficit with China decreased by nearly 32%, the gap doubled with Taiwan and increased by 44% with Vietnam as trade routes were diverted.
