According to a Federal Reserve report released Wednesday, businesses are grappling with the early effects of President Donald Trump’s tariffs and are strategizing on how to transfer mounting costs to consumers.
As Trump implemented broad tariffs on imports and increased duties on Chinese goods, the Fed’s “Beige Book” outlined the responses from various businesses. Many companies reported receiving notifications from suppliers regarding rising costs and are exploring methods to avoid absorbing these increases while expressing concern about their ability to pass on expenses to customers.
The report stated, “Most Districts noted that firms expected elevated input cost growth resulting from tariffs,” emphasizing that many businesses had already been informed by suppliers of impending cost hikes.
Overall, the report, which is published approximately every seven weeks, described economic growth as relatively stable, mirroring findings from the March 5 report. Nevertheless, it highlighted a pervasive uncertainty surrounding international trade policy across all 12 Fed districts.
During this reporting period, which included Trump’s announcement of the blanket tariffs on April 2, general price levels increased. Employment figures remained “little changed,” with noticeable declines in government job counts.
The report also noted that “Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy.” While many businesses anticipated passing additional costs onto customers, concerns arose regarding margin compression due to rising costs and lukewarm demand, especially in consumer-facing sectors.
In the New York region, businesses reported significant price increases in food, insurance, and construction materials. Additionally, manufacturers and distributors indicated that they were already implementing surcharges related to shipping costs.
The report also identified challenges stemming from the trade dispute with Canada, highlighting a decrease in hotel bookings by tourists in New York City, as well as losses in business connections for at least one tech firm in its dealings with Canadian clients.
“The outlook for service sector firms worsened noticeably, with contacts anticipating a sharp decline in activity in the coming months. Service sector firms reported a significant reduction in planned investments,” the report added.
Moreover, organizations that rely on government support are facing increasing challenges, particularly since the White House has begun reevaluating funding for various federal aid programs. The report pointed out that food banks in New York are experiencing cuts to both support programs and personnel.
Concerns about the future of federal funding and support services were echoed by contacts at non-profits and community-based organizations, which cite difficulties in staffing, strategy, and planning as a result of these budgetary constraints.
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