Fed finds that uncertainty about tariffs has become ‘pervasive’ in the economy.

Takeaways

• Uncertainty about tariffs became "pervasive" among business and community leaders around the country in April, according to a report by the Federal Reserve.
• Business leaders say that uncertainty makes it difficult to plan for the future and invest.
• The report highlighted the "on the ground" consequences of President Donald Trump's rapidly shifting trade war.

Tariffs are a hot topic, but no one knows what to do with them.

The “Beige Book”, published by the Federal Reserve on Wednesday, confirms this. The report showed that uncertainty about tariffs increased in April among business and community leaders in the United States as President Donald Trump’s trade war took unpredictable turns. Some businesses prepared for price increases due to the import taxes. Others prepared for layoffs. And some were unable make plans.

The Beige Book was a compilation reports from business leaders, nonprofits, and community leaders of local Fed districts throughout the country. This book gave a snapshot as to how Trump’s Trade Policies are affecting Main Street.

Fed economists noted that the economic activity had not changed significantly since the last report, but there was a general feeling of uncertainty regarding international trade policies.

The report for April showed that tariff concerns have increased from a high level in March. The reports mentioned “uncertainty,” or a variation, 89 times in the month of April. This is up from 47 mentions in March. “Tariffs”, a term that was previously mentioned 49 times, now appears 107. In April 2024 when tariffs weren’t even a gleam of an idea in the eye then-candidate Trump at that time, “uncertainty”, on the other hand, was mentioned 13 times.

Experts have warned for years that Trump’s on and off campaign to impose import taxes would stifle economic growth by forcing businesses to delay investments. The report shows that these warnings are beginning to come true, particularly in the Richmond district.

The report stated that “multiple contacts put investments on pause due to increased insecurity.” “A military-equipment manufacturer reported that the conditions were too chaotic to make any future investment decisions.”

In Atlanta, “Contacts in lumber and wood products manufacturing experienced slowing demand amid ambiguity surrounding tariffs—one firm noted having ‘zero faith in even a 6-month forecast,’ and that the biggest hurdle to expansion and mergers and acquisitions was not knowing how trade policy will settle out.”

The story was the same across the country. People in the construction and property business in Minnesota told the Fed that “new projects have dried up completely during the first quarter.” …Uncertainty at the federal government level has frozen almost all activity. Another said that “clients are reluctant to proceed with design work until there is some sort of predictability and certainty.”