Washington
CNN
—
In the New England region, a clothing store re-tagged items to be sold during the summer to cover the cost of tariffs. A car dealership in upstate New York said its inventory has been depleted by Americans rushing to get ahead of tariffs. And an electronics manufacturer said President Donald Trump’s sweeping policy changes are “raising hell with businesses.”
These accounts — and the picture they paint about the US economy — come from various surveys of businesses released this week from the Federal Reserve, the Institute for Supply Management (ISM) and S&P Global. Taken together, they show that businesses of all sizes and across industries are slogging through a fog of uncertainty stemming from Trump’s policies, most notably his on-again, off-again tariffs.
The term “tariffs” was mentioned 80 times in the Fed’s “Beige Book” report, a periodic collection of survey responses from businesses across the country, while “uncertainty” was mentioned 76 times.
Businesses and consumers have been on edge since the beginning of the year, but the latest surveys show that Trump’s policies are clearly reverberating throughout the economy, affecting inflation, hiring and many companies’ finances — all while consumers try to figure out whether to spend now or wait until later.
Investors and economic policymakers pore over surveys like these, which can help gauge economic conditions sooner than official government data can.
Tariffs have long been expected to jack up prices, and even though much of Trump’s trade policy is in question by the courts, many businesses say their input costs have gone up. Some have already raised prices for consumers.
“Most suppliers are passing through tariffs at full value to us,” a chemical products manufacturer told ISM. “The position being communicated is that the supplier considers it a tax, and taxes always get passed through to the customer.”
A heavy construction equipment supplier in the New York Fed’s region said that “they raised prices on goods unaffected by tariffs to enjoy the extra margin before tariffs increased their costs.” Responses for the Beige Book were collected from late April through May 23, so it doesn’t capture businesses’ reaction to the two recent court rulings arguing that the president overstepped his authority in imposing the bulk of his import levies.
“Contacts across industries, particularly those in manufacturing and construction, said that they raised prices to cover costs related to tariffs and to elevated prices of materials such as steel,” the Fed said in its report. On Wednesday, US tariffs on steel and aluminum imports doubled to 50%, which is expected to further raise the cost of construction projects and household appliances.
In addition to prices, Trump’s erratic trade war is also affecting the job market.
A staffing agency in the Chicago Fed’s district said that “many businesses had paused hiring due to economic uncertainty.” In Richmond, Virginia, a business consultant told the Fed that it plans on reducing headcount by 20% “due to declining revenues and uncertainty about future business.”
In recent months, many Americans have rushed to stores or clicked repeatedly on the “add to cart” button to avoid future tariff-fueled price hikes, according to economic data. But that spending spree may be drawing to a close — if it hasn’t already.
Retail sales surged 1.7% in March from the prior month, the strongest monthly gain in two years, largely driven by skyrocketing car sales, according to Commerce Department data. Retail spending slowed sharply the following month, with car sales declining slightly.
But demand for vehicles could soon take a turn for the worse, since many consumers have already snagged a car and a 25% tariff is currently in place on all car and auto part imports.
“One dealership expected tariff-related sticker shock to hit customer demand starting in early June,” the Fed’s report said. In the Philadelphia Fed’s district, some dealers reported “a slight decline in auto sales” recently.
Some non-auto retailers have already noted “some evidence of softening consumer demand that is expected to dampen future sales.” In the St. Louis Fed’s district, businesses said that “retail sales have slightly declined, especially for discretionary items.”
