April 18, 2018 / 10:40 PM / 10 months ago

FACTBOX-Tariff talk looms large in Federal Reserve's latest "Beige Book" business survey

    By Dan Burns
    April 18 (Reuters) - The Federal Reserve's latest "Beige
Book", a summary of the state of U.S. business across the
central bank's 12 regional districts published on Wednesday,
featured an explosion in references to import tariffs as
American firms estimated the impact of the Trump
administration's newest trade policies.
    The words "tariff" or "tariffs" appeared 36 times in the
32-page Beige Book report, compared with 20 references in total
from all of the reports compiled over the past two decades,
according to a review of archived material on the Fed's website.
    Tariffs have never been referenced more than twice in a
single Beige Book going back to October 1996, the furthest back
the Fed catalogs the full reports on its site.
    The words have now appeared 40 times in the Beige Book since
Republican Donald Trump became president in January 2017. Under
his predecessor, Democrat Barack Obama, they were mentioned just
    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.
    In all, in the latest Beige Book, tariffs were raised by
business contacts in 10 of the Fed's 12 districts, with only the
reports from the Federal Reserve banks of New York and St. Louis
omitting a reference.
    In many instances, they were referenced in connection with
the 25 percent duties on imported steel and aluminum announced
in March, but some contacts raised concerns about the wider list
of proposed imports targeted by the White House earlier this
    The following are the passages from the newest Beige Book
attributed to business contacts in Fed districts around the
    "In general, respondents were optimistic in their outlook.
However, two contacts brought up the proposed China tariffs and
said they represent a major risk. One was a toy manufacturer who
sources 75 percent of their production from China. The second
said that punitive tariffs on Chinese aluminum had already had a
big effect: 'Thin gauge foil' is produced only in China and
tariffs raised the price three-fold; the contact argued that
'these tariffs are now killing high-paying American
manufacturing jobs and businesses.'"
    "Of the 22 manufacturing firms that offered general
comments, seven mentioned impacts from recent tariffs or
proposed tariffs – most noted rising prices or anticipated
rising prices; just one firm anticipated greater demand."    
    "According to contacts, recently imposed tariffs have
accelerated price appreciation of steel products, in some cases
at double-digit rates."
    "One steel manufacturer mentioned that customers are
attempting to stock up as prices rise because of increased
demand and tariffs on primary metals imports."    
    "Rising freight volumes across product segments were
attributed primarily to solid economic growth. There is concern
about the sustainability of increasing volume because of newly
enacted tariffs and potential outcomes from NAFTA negotiations."
    "Prices grew moderately, on balance; however, steel and
aluminum prices rose sharply and were expected to rise further
as a result of recently-imposed tariffs."
    "Steel and aluminum prices rose sharply and were expected to
rise further as a result of recently-imposed tariffs."
    "(A) Virginia display case manufacturer reported stockpiling
steel in anticipation of higher prices resulting from the new
     "Several ports noted some uncertainty about what effects
the steel tariffs might have on trade."
    "Most firms noted that most non-labor input cost pressures
were muted, though some noted increases related to the threat of
    "Overall, businesses continued to report relatively benign
input-cost pressures. However, some contacts noted rising prices
for transportation, as well as steel as tariff rhetoric
increased. The Atlanta Fed’s Business Inflation Expectations
survey showed year-over-year unit costs were up 1.9 percent in
March. Looking ahead, survey respondents indicated that they
expect unit costs to rise 2.1 percent over the next twelve
    "Income prospects for the agricultural sector improved a
bit, in spite of concerns about the impact of Chinese tariffs."
    "Manufacturers facing higher steel and aluminum costs
because of the new tariffs expected to pass on about half of the
increased costs to their customers on average."
    "Steel imports spiked in anticipation of the 25 percent
tariff imposed in late March."
    "Multiple contacts reported dramatic increases in the prices
for steel products, partly attributable to recently announced
tariffs; a manufacturer of tractor trailers said they 'can't
raise prices as fast as material costs.'"
     KANSAS City:
    "The majority of contacts (in the energy sector) said
potential steel and aluminum tariffs would have a low-to-medium
impact on their drilling costs, and several have already
experienced moderate increases in the cost of steel."
    "Outlooks, while still optimistic, have become more
uncertain due to new tariffs and trade concerns."
    "Price pressures remained elevated over the past six weeks.
Input cost pressures increased among energy, manufacturing, and
construction firms, partly due to the announced tariffs on steel
and aluminum. Upstream energy firms said the steel tariffs
represent a worry, although some contacts said there shouldn't
be much of an impact on costs until 2019 when contracts roll
over. Downstream energy contacts were still figuring out how
much of their steel is subject to the new tariff and how that
will affect their costs and investment decisions.
    "Several manufacturers said that talk of steel tariffs
immediately resulted in higher steel prices. An architecture
firm noted that the increase in steel costs will impact the
ability of their clients to move forward with some construction
    "Expectations regarding future business conditions remained
optimistic, although several contacts noted that the newly
enacted tariffs were creating a lot of uncertainty in their
outlooks for activity and prices. Refiners and petrochemical
producers specifically mentioned their views about the potential
negative impact of these tariffs on construction projects."
    "Outlooks rose slightly over the past six weeks, although
uncertainty surrounding trade policies and the new tariffs
negatively impacted some (non-financial services) firms'
    "Some contacts (in the financial services sector) mentioned
optimism in the market due to tax reform, while others noted
uncertainty about how new tariffs will impact Texas businesses."
    "Contacts reported a jump in inflationary pressures for
metals prices, partly due to the anticipation of tariffs and
unrelated increases in raw material costs."

 (Reporting by Dan Burns)
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