Businesses are looking for ways to push costs onto customers to deal with the early stages of President Donald Trump’s tariffs, according to a Federal Reserve report.
Tariffs were a hot topic in the Fed report, mentioned 107 times, which is over double the number mentioned in the last Beige Book. The report also found the outlook “worsened considerably” in several regions as economic uncertainty increased.
Companies reported getting notices from suppliers about rising costs and were trying to find ways to not absorb costs but instead pass them along to customers in this time of uncertainty.
“Most Districts noted that firms expected elevated input cost growth resulting from tariffs,” the report said.
“Many firms have already received notices from suppliers that costs would be increasing.”
Prices generally rose from the previous report, especially after Trump’s 2 April liberation day announcement of blanket tariffs.
The report mentioned variations of the word “uncertain” 89 times, and firms reported adding tariff surcharges or shortening pricing horizons to account for this.
“Most businesses expect to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms,” the report said.
In the New York area, firms reported rising prices mainly in food and insurance, along with construction materials, with manufacturers and distributors already adding surcharges due to shipments.
Tourism is also down in New York City due to severed connections in Canada. One firm reported losing at least one long-term business contact in Canada.
“The outlook for service sector firms worsened noticeably, with contacts anticipating a sharp decline in activity in the coming months,” the report said.
While the overall employment figure remained largely unchanged, Elon Musk’s DOGE has had an impact on federal government workers, with many layoffs in recent weeks.
“Several districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions,” the report said.
“In addition, there were scattered reports of firms preparing for layoffs.”
Many service organisations dependent on government support also noted difficulties with New York food banks, especially seeing cuts in programs and personnel.
“Contacts at non-profits and other community-based organisations expressed significant concern about the future of federal funding and services support, creating challenges in staffing, strategy, and planning,” the report said.
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