Fed’s Beige Book Still Shows No Signs that Tariffs are a Tax on Consumers

American businesses are voicing worries over rising tariffs and a tight labor market but rising input costs are often not being passed on to consumers, according to a Federal Reserve report released Wednesday.

“Tariffs were reported to be contributing to rising input costs, mainly for manufacturers. Businesses’ input costs have generally been rising more rapidly than selling prices,” the Federal Reserve said in its Beige Book, a survey of anecdotal information collected from business contacts across the Fed’s 12 districts.

This suggests that the brunt of the tariffs is being borne by businesses rather than being passed on to consumers. That conclusion is also supported by producer price data released by the Department of Labor on Wednesday.

The Fed noted that some businesses say they plan to try to pass higher costs on to consumers at some point in the future.

The Federal Reserve Bank of New York, for example, said:

Businesses continued to report widespread hikes in input prices–particularly in manufacturing, wholesale trade, and education & health. Contacts in almost all sectors anticipated further increases in the months ahead, with a sizable number of contacts indicating that tariffs were driving up costs, particularly in the manufacturing sector.

As for selling prices, however, fewer businesses than in recent months said they were raising their prices–particularly in the wholesale trade sector. One notable exception was in the education & health industry, where contacts noted some acceleration in prices received. Retailers generally indicated that selling prices have remained stable, with one contact noting widespread discounting on remaining summer merchandise. A number of wholesale trade and transportation contacts said they planned to hike prices in the months ahead.

The Trump administration has imposed tariffs on tens of billions of dollars worth of imports, including duties on steel, aluminum, and Chinese made technology. China and others have retaliated by imposing their own tariffs on U.S. made goods and U.S. grown crops. Many critics of the Trump administration’s trade policies had predicted that tariffs would hurt consumers by raising prices. Those forecasts have not been supported by the data on prices released since the tariffs were imposed.

Tariffs are mentioned 38 times in the Beige Book, up from 27 in the previous edition. The Beige Book, more formally known as the Summary of Commentary on Current Economic Conditions, is published 8 times a year by the Fed.

While many of the business contacts talked about tariffs, much of the talk was about concerns over possible future effects rather than reports of effects already observed.
In Philadelphia, for example, “manufacturers reported paying higher prices, other contacts reported no current shift in inflation trends, but many worried that tariffs would trigger future inflation.”

“Bankers and other contacts” in Philadelphia, “cited labor shortages, wage pressures, and tariffs as concerns for spurring inflation, but none reported evidence of current inflation.”

A Kentucky rail transporter voiced concerns that tariffs may reduce demand in the upcoming grain season. The Chicago Fed reported that hog prices had declined due retaliatory tariffs that had reduced exports.

The overall picture presented by the Beige Book is one of a moderately expanding economy where wage gains remain “modest” to “moderate.”