Federal Reserve Beige Book: Tariffs may curb US economic growth amid uncertainty

After 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 curb growth momentum in the coming months. On Wednesday, the Beige Book report stated, "Since the last report, there hasn't been much change in economic activity, but uncertainty surrounding international trade policies is widely present in reports from various regions." The Beige Book is released eight times a year and is an important basis for the Federal Reserve to evaluate the economic conditions and decide whether to adjust interest rates. This report is the first survey since the end of February, and also the first Beige Book after the Trump administration imposed tariffs on a large scale. The report points out, "Due to rising economic uncertainty, especially uncertainty related to tariffs, the economic outlook in multiple regions has significantly deteriorated." Trump announced the tariff policy earlier this month, known as the "liberation day" action, triggering the most serious global trade war since the 1930s. This trade dispute has made American families and businesses full of doubts. Economists warn that if trade frictions continue, it may lead to increased inflation, higher unemployment, and even trigger an economic recession. Before the tariffs were officially implemented, to avoid the risk of price increases, some consumers and businesses made early purchases. For example, influenced by the "run-up effect," new car sales in the U.S. surged to the highest level in three years. However, if car sales are excluded, the Federal Reserve points out that U.S. consumer spending has actually decreased since the end of February. Additionally, fewer Americans are traveling, and the number of foreign visitors 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 for the whole year. The report also notes that overall employment has slightly increased, but businesses are generally cautious about hiring. Although the number of new jobs in the private sector has increased, employment in government departments and institutions that rely on federal funding has decreased. The Beige Book states, "Several regions report that businesses are taking a wait-and-see approach to employment, pausing or slowing down recruitment until the economic outlook becomes clearer." In terms of inflation, the current price increase is still relatively mild, but many businesses anticipate that future raw material costs will rise due to the impact of tariffs. They plan to pass these costs on to consumers, but also recognize that consumers are resistant to price increases. Some businesses may be forced to absorb the additional costs themselves, leading to a decrease in profits. The Federal Reserve points out that a decline in business profits may potentially drag down overall economic performance and even prompt businesses to lay off employees to control expenses.