Federal Reserve Beige Book: Tariffs create uncertainty that may suppress U.S. economic growth
The Federal Reserve's Beige Book shows that the U.S. economy is steadily expanding, but uncertainty caused by tariffs may suppress growth in the coming months. The report points out that uncertainty in international trade policy is widespread, and the economic outlook is deteriorating. Although employment has seen slight growth, businesses are cautious about hiring, consumer spending is declining, and the tourism industry may lose billions of dollars. Regarding inflation, companies expect rising raw material costs and plan to pass those costs onto consumers
After U.S. President Trump implemented tariffs globally, the economic situation report released by the Federal Reserve shows that the U.S. economy is still steadily expanding, but the "widespread uncertainty" may suppress growth momentum in the coming months. According to the Zhitong Finance APP, on Wednesday, the Beige Book report stated: "Since the last report, economic activity has changed little, but uncertainty surrounding international trade policy is widely reported across regions."
The Beige Book is published eight times a year and serves as an important basis for the Federal Reserve to assess economic conditions and decide whether to adjust interest rates. This report is the first survey since the end of February and the first Beige Book after the Trump administration's large-scale tariff increases.
The report pointed out that "due to rising economic uncertainty, especially uncertainty related to tariffs, the economic outlook has significantly worsened in several regions."
Trump announced the tariff policy earlier this month, referred to as the "Day of Liberation" action, triggering the most severe global trade war since the 1930s. This trade dispute has left American households and businesses filled with doubts. Economists warn that if trade frictions continue, they may drive up inflation, increase unemployment, and even trigger an economic recession.
Before the tariffs were officially implemented, some consumers and businesses made advance purchases to avoid potential price increases. For example, influenced by the "front-running effect," U.S. new car sales surged to the highest level in three years. However, excluding auto sales, the Federal Reserve noted that consumer spending in the U.S. has actually declined since the end of February.
Additionally, Americans are traveling less, and the number of foreign tourists coming to the U.S. has also decreased. Economists estimate that this trend could result in the U.S. tourism industry losing hundreds of billions of dollars over the year.
The report also noted that overall employment has slightly increased, but businesses are generally cautious about hiring. Although the number of new jobs in the private sector has risen, employment in government departments and federally funded agencies has declined.
The Beige Book stated: "Several regions reported that businesses are taking a wait-and-see approach to employment, pausing or slowing down hiring until the economic outlook becomes clearer."
Regarding inflation, current price increases remain relatively moderate, but many businesses indicate that due to the impact of tariffs, raw material costs are expected to rise in the future. They plan to pass on the costs to consumers but also realize that consumers are resistant to price increases.
Some businesses may be forced to absorb the additional costs themselves, leading to a decline in profits. The Federal Reserve pointed out that the decline in corporate profits could drag down overall economic performance and even prompt companies to lay off workers to control expenses
