Concern that the Trump administration’s tariffs on steel and aluminum imports will benefit domestic producers but hurt domestic manufacturers are proving founded.
The latest Beige Book, the Fed’s roundup of economic activity in each of its regional districts, cites numerous instances of rapidly rising material prices, specifically including a truck-trailer manufacturer who said the business “can't raise prices as fast as material costs.”
That sentiment was echoed by respondents in the manufacturing and transportation sectors across all 12 districts, as indicated by the word “tariff” appearing 36 times in the 32-page Beige Book, compared to zero in the previous report released March 7. “Steel” appeared 29 times and “aluminum” nine.
In fact, the words “tariff” or “tariffs” appeared only 20 times in all the reports compiled over the past two decades combined, according to a Reuters review of archived material on the Fed’s website.
One contact in the Boston region said the punitive tariffs on Chinese aluminum already are having a big effect, arguing “these tariffs are now killing high-paying American manufacturing jobs and business.”
Reports out of the Philadelphia region indicate manufacturing firms continue to anticipate higher prices, with nearly two-thirds expecting increases in prices paid and over half expecting increases in prices received for their goods. Seven manufacturers referenced the impact of tariffs on prices.
In the Cleveland region, contacts said manufacturers have raised prices steadily since the beginning of the year “to pass along their higher raw materials and transportation costs.” One steel manufacturer mentioned customers attempting to stock up as prices rise, due in part to tariffs on primary metal imports.
Several trucking firms in the Richmond region were concerned about rising equipment and repair costs potentially leading to a shortage of trucks, adding to capacity constraints.
Still, most manufacturers anticipated continued growth, with demand for heavy trucks remaining strong in the Atlanta region. Several companies in the St. Louis district reported facility expansion and hiring plans, including firms that produce auto parts and aviation equipment. In addition, steel and aluminum manufacturers announced plans to reopen facilities and call back workers.
Capacity utilization across a range of manufacturing sectors in the San Francisco region, including steel, picked up noticeably despite rising input prices. However, a contact in the metals industry noted greater uncertainty about production costs because materials suppliers wouldn’t enter price-guarantee agreements.
Visit the Federal Reserve’s Beige Book page for the full report.