Prices are rising and economic activity is decelerating in various regions of the United States as businesses and households grapple with the unpredictable implementation of tariffs by President Donald Trump. According to a report released by the Federal Reserve, known as the “Beige Book,” there has been a noticeable rush to purchase vehicles in anticipation of higher import duties. However, many companies are experiencing a slowdown in operations as they navigate these turbulent conditions, which has led to hesitance on making significant investments.
The report noted that price changes were happening rapidly, with indications of potential layoffs on the horizon. The Fed’s latest snapshot highlights widespread uncertainty surrounding international trade policy, as reported by businesses across the country. Conditions have worsened in several districts, exacerbated by the rising uncertainty fueled by tariffs.
This Beige Book, reflecting information gathered through mid-April, provides a timely insight into the economic climate just ahead of critical Fed policy meetings. Regional reports varied, with the Cleveland Fed noting a stagnant economy and anticipation of declining demand in the construction sector due to increased costs linked to tariffs. Meanwhile, the Richmond Fed cited a coffee roaster facing unprecedented cost hikes and a military contractor reporting chaos leading to investment paralysis.
Firms across the board are aware of impending price increases and are holding back on major investments until the impact of tariffs becomes clearer. While Fed Chair Jerome Powell and policymakers are deliberating their next moves, they recognize that tariffs could lead to both inflation and slower economic growth—a challenging situation given the central bank’s ability to manage only one of these issues at a time. Almost all Fed districts reported concerns over potential layoffs, stemming from both softened demand and mounting cost pressures.
The Beige Book revealed significant instinctual adjustments within businesses in response to tariffs. The Fed’s waiting strategy might soon face strain as initial signs of economic confidence falter, driven by expected inflation increases. With the next rate-setting meeting approaching, markets anticipate potential rate cuts in the near future, despite current figures indicating a robust labor market.