Federal Reserve Chairman Jerome Powell said President Donald Trump’s tariffs were higher than expected, raising the risk of further inflation.
A new Federal Reserve report shows that US companies are reporting increased costs due to tariffs.
On Wednesday, the Federal Reserve issued the latest version of the Beige Book, which is published eight times a year, summarizing the economic situation of each of the Fed’s 12 regional districts. Uncertainty over international trade policy is “wide” and concerns about tariffs on imported goods have increased costs for both businesses and consumers as President Donald Trump strives to readjust global trade.
“Most districts said businesses expect an increase in production costs due to tariffs. Many companies have already received notifications from suppliers with increased costs,” the Fed’s national summary said. “Companies reported adding additional tariff charges or shortening the range of pricing to explain uncertain trade policies.”
“Most companies expect to pass additional costs to consumers, but there have been reports on margin compression amid rising costs, especially in consumer-oriented companies, as demand remained lukewarm in some sectors,” he added.
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Taxes are taxes on imports paid by importers, which often pass higher costs to consumers at higher prices. (Getty Images/Sam Wolf via Getty Images/Bloomberg)
In the Boston area, the Fed said, “Retail and manufacturing contacts have warned that increasing costs associated with tariffs are still being determined, but could result in a significant pass-through in production prices.”
“The expected pass-through rate was substantial, with over half of manufacturers projecting full pass-through with little or no lag. One manufacturer reduced the price estimate period to 30 days, anticipating the need to quickly adjust prices,” he continued.
The Boston area also said “travels from Canada have declined significantly, and contacts feared that summer trips from Europe and China could also suffer due to negative reactions to US tariff policies.”
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Auto dealers reported a surge in demand as consumers appeared to make purchases before tariffs were in effect and prices increased. (Frederic J. Brown/AFP via Getty Images)
According to reports from several Fed districts, the auto industry has seen a short-term boost, at least due to tariff uncertainty, as consumers were rushing to buy cars ahead of the 25% tariffs that are in effect on imported cars.
“The auto dealership reported a significant increase in sales after a slight increase in past periods. Multiple contacts highlighted the record highs in March. However, all of our automotive industry contacts do not expect to continue the strength of demand, boosting this boost to take over the advance in vehicle purchases.
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Home builders noted the rise in costs caused by tariffs on construction materials. (Angus Mordant/Bloomberg via Getty Images)
Home builders in several Fed areas have been noted that tariffs increase construction costs and slow demand due to uncertainty.
Tariffs have also affected the shipping industry. The Richmond Fed noted that one of the ports in the district reported a “unexpected and disappointing” 25% decline in monthly export transport.
The Trump administration’s plan to collect port calls on Chinese ships to support domestic shipbuilding was also attracting attention as a source of costs.
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“The port contacts were particularly concerned about the port tax proposal for Chinese vessels, which could result in a quadruple fee for handling freight. Some ports have already been ordered, tariffs have been enacted and now received multi-million dollar tariff invoices for Chinese cranes with tariffs,” Richmond wrote.
