Andrew Harrer/Bloomberg via Getty Images
Takeaways from the Key Notes
- Many economists predict that President-elect Donald Trump's potential tariffs on Mexico, Canada, and China will increase the prices for U.S. consumers. The Federal Reserve's most recent Beige Books showed that this has also become a concern for American businesses.
- Tariffs are a concern for business leaders, who fear that they could affect their profit margins. They would most likely drive consumers off the market by increasing prices and making international imports even more costly.
- Many people reported that they were stockpiling goods to prevent negative tariff effects.
The American business community is concerned that tariffs will lead to inflation and has taken steps to safeguard future sales.
That’s according to this month’s Beige Book, which gives the Federal Reserve insight into how economic conditions are playing out across the country. Business leaders in the United States reported that they were stockpiling and delaying investments due to uncertainty over President-elect Donald Trump’s possible tariffs.
Trump announced last week that he will impose heavy tariffs upon imports coming from China, Mexico, and Canada once he assumes office. Tariffs are causing concern among economists who say that taxes on imported goods could result in higher prices being passed onto consumers by importers.
U.S. U.S. Businesses Are Worried About Tariffs
Although U.S. business leaders' general economic outlook has modestly improved since the last edition of the Beige Book, they expressed concern over how tariffs would drive up prices.
Ernie Tedeschi of the Yale Budget Lab’s director of economics says tariffs imposed on Mexico, Canada and China are likely to increase household prices by approximately $1,180. Tariffs, according to Tax Foundation could deter American consumers from purchasing products.
"Inflation expectations rose for firms’ own prices and for general inflation, with many firms expressing concern about the inflationary effects of potential tariffs," wrote officials from the Federal Reserve Bank of Philadelphia.
Dallas official said that a few contacts in the business world saw election results as key drivers of optimism. However, some were concerned about how tariffs might impact sales internationally.
What businesses are doing in response
Importers, including those who work in electronics, shoes and cars as well as fresh fruit and vegetable companies, should be particularly concerned.
Fed officials stated that uncertainty was causing some businesses not to invest until the policies were implemented or countries reached an agreement. Business leaders reported stocking up on inventory before Trump's inauguration in January to mitigate harm caused by potential tariffs.
“A computer retailer noted an increase in sales in recent weeks as business clients pulled ahead replacement plans to avoid expected higher prices for imported electronics,” Chicago Fed officials have written.
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