The Marriner S. Eccles Federal Reserve building stands in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

Here Are the Biggest Tariff Concerns in the Fed's Beige Book

(Bloomberg) -- The U.S. economy may still be expanding at the now-familiar “modest to moderate pace,” but a new theme pervaded the Federal Reserve’s latest Beige Book report: tariffs and the threat of a trade war. The word “tariff” appeared 36 times in the report compared with zero references in the prior survey. Here are some of the highlights from the business survey released Wednesday, by regional Fed district:

Boston

“In general, respondents were optimistic in their outlook. However, two contacts brought up the proposed China tariffs and said they represent a major risk. One was a toy manufacturer who sources 75 percent of their production from China. The second said that punitive tariffs on Chinese aluminum had already had a big effect: ‘Thin gauge foil’ is produced only in China and tariffs raised the price three-fold; the contact argued that ‘these tariffs are now killing high-paying American manufacturing jobs and businesses.”’

Philadelphia

“Builders continued to note rising prices for construction materials as well as labor and noted concerns about a potential trade war. Contacts cited double-digit price hikes for lumber and drywall and expressed concern for steel and reinforced concrete. ... Of the 22 manufacturing firms that offered general comments, seven mentioned impacts from recent tariffs or proposed tariffs -- most noted rising prices or anticipated rising prices; just one firm anticipated greater demand.”

Cleveland

“Upward pressure on input prices remained strong, particularly for commodities used by goods producers. According to contacts, recently imposed tariffs have accelerated price appreciation of steel products, in some cases at double-digit rates. One steel manufacturer mentioned that customers are attempting to stock up as prices rise because of increased demand and tariffs on primary metals imports.”

Richmond

“Steel and aluminum prices rose sharply and were expected to rise further as a result of recently-imposed tariffs. ... a Virginia display case manufacturer reported stockpiling steel in anticipation of higher prices resulting from the new tariffs.”

Chicago

“Manufacturers facing higher steel and aluminum costs because of the new tariffs expected to pass on about half of the increased costs to their customers on average. ... Steel imports spiked in anticipation of the 25% tariff imposed in late March.”

Minneapolis

“Multiple contacts reported dramatic increases in the prices for steel products, partly attributable to recently announced tariffs; a manufacturer of tractor trailers said they ‘can’t raise prices as fast as material costs.”’

Kansas City

“The majority of contacts said potential steel and aluminum tariffs would have a low-to-medium impact on their drilling costs, and several have already experienced moderate increases in the cost of steel.”

Dallas

“Expectations regarding future business conditions remained optimistic, although several contacts noted that the newly enacted tariffs were creating a lot of uncertainty in their outlooks for activity and prices. Refiners and petrochemical producers specifically mentioned their views about the potential negative impact of these tariffs on construction projects.”

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