July 18, 2018 / 8:41 PM / a year ago

FACTBOX-Tariffs remain top worry in Federal Reserve's 'Beige Book' business survey

    By April Joyner
    July 18 (Reuters) - Tariffs featured heavily in the Federal
Reserve's latest "Beige Book," a summary of the state of U.S.
business across the central bank's 12 regional districts, with
respondents describing the trade spat as creating effects such
as "panic buying" and a "rush to purchase metals."
    The July Beige Book, at 32 pages, includes 31 instances of
the words "tariff" or "tariffs." Nearly all of the Fed's
regional districts made reference to tariffs in their individual
    In several of the Fed's districts, business contacts noted
that tariffs on steel and aluminum, which went into effect in
March, had contributed to rising input costs. Several of them
said that much of those costs have not been passed on to
consumers, resulting in lower profit margins. One can
manufacturer in Maryland said he anticipated losing business
outright to foreign competitors unburdened by steel tariffs.
    Mentions of tariffs surged in the April Beige Book, which
featured 36 such references as U.S. companies grappled with the
effects of 25 percent duties on imported steel and aluminum
announced in March. The May Beige Book included 22 references to
    In Beige Books over the preceding two decades, tariffs had
been mentioned only 20 times. Before April, tariffs had not been
mentioned more than twice in a single Beige Book going back to
October 1996, the furthest back the Fed catalogs the full
reports on its website. The Beige Book is published eight times
a year. 
    The words "tariff" or "tariffs" have now appeared 93 times
in the Beige Book since Republican Donald Trump became president
in January 2017. Under his predecessor, Democrat Barack Obama,
they were mentioned twice.  
    Tariffs made 14 appearances in Beige Books issued during
Republican George W. Bush's term. Bush imposed tariffs on
imported steel in the spring of 2002 and lifted them at the end
of 2003, and most of the references to duties appeared around
that period.
    The following are selected passages from the newest Beige
Book attributed to business contacts in Fed districts around the
    "Most respondents reported modest increases in prices.
Although contacts were concerned about the effect of tariffs,
none of our contacts reported any material impact so far."
    "A number of manufacturing contacts remarked that tariffs
have raised their costs. Moreover, uncertainty about future
trade policy was cited as a major concern, particularly in parts
of upstate New York, where there is substantial trade with
    "One machinery manufacturer noted that the effects of the
steel tariffs have been chaotic to its supply chain – disrupting
planned orders, increasing prices, and prompting some panic

    "Manufacturers and builders commented widely that import
tariffs were lifting steel and aluminum prices. In some cases,
manufacturers noted a rush to purchase metals in anticipation of
additional price increases."
    "Most manufacturers expected that continued economic growth
would lead to stronger customer demand in the near term.
However, one auto-related manufacturer expected import tariffs
to lead to weaker sales because of the consequent increase in
    "Manufacturers also expressed concern about the potential
adverse effects of rising trade tensions. For example, a
District foam manufacturer reported growth in business but
growing costs of raw materials resulting from tariffs.
Additionally, a Maryland can manufacturer said he could not get
the quality of steel needed domestically and anticipated losing
business to foreign competitors who are not faced with steel
    "Expectations of rising costs related to tariffs continued
to contribute to vendor price increases for commodities. The
Atlanta Fed's Business Inflation Expectations survey showed
year-over-year unit costs were up 2.0 percent in June. Looking
ahead, survey respondents indicated that they expect unit costs
to rise 2.1 percent over the next twelve months."
    "Contacts in the agricultural sector noted heightened price
volatility related to uncertainty over U.S. and foreign tariff
    ST. LOUIS:
    "Tariffs and trade restrictions have had a mixed effect on
prices. U.S.-imposed tariffs have raised the prices of steel and
aluminum, increasing input costs for several business contacts.
Those contacts in construction lamented that rising prices
pressured the industry before this tariff-induced inflation of
metal costs. In contrast, proposed tariffs by China have led to
an overall downturn in agricultural commodity prices,
particularly the price of soybeans. These lower agricultural
commodity prices have been passed on to food retailers, who
reported that lower food prices have more than offset increased
freight costs."
    "Manufacturing contacts reported that steep increases
continued in aluminum and steel material input costs in reaction
to tariff announcements."
    "Input costs increased among energy, manufacturing, and
construction firms, in part due to rising freight costs and the
new tariffs on steel, aluminum, and lumber."
    "While outlooks overall remained positive, rising interest
rates and the newly imposed tariffs were negatively impacting
some retailers' expectations."

    "A few contacts in manufacturing attributed recent
inflationary pressures for metal products and declines in the
duration of price guarantees to the implementation of tariffs."

 (Reporting by April Joyner; additional reporting by Dan Burns
Editing by James Dalgleish)
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