US Businesses Are Worried About Trump’s Proposed Tariffs

American businesses are worried about the inflationary effects of tariffs and are taking action to protect future sales.

That’s according to this month’s Beige Book, which gives the Federal Reserve insight into how economic conditions are playing out across the country. In December, the U.S. business leaders reported stockpiling inventory and waiting on investments as uncertainty about President-elect Donald Trump’s potential tariffs weighs heavy.

Last week, Trump said he plans to impose hefty tariffs on imports from China, Mexico and Canada as soon as he takes office. Economists have expressed concerns over tariffs, saying taxes on imports could lead to higher prices for U.S. consumers as importers pass price increases along to shoppers.

U.S. Businesses Worry How Tariffs Will Affect Them

Although U.S. business leaders’ general economic outlook has modestly improved since the last edition of the Beige Book, they expressed concern over how tariffs would drive up prices.

According to Ernie Tedeschi, director of economics at the Yale Budget Lab, tariffs on Mexico, Canada, and China would likely increase prices by about $1,180 per household. According to the Tax Foundation, tariffs could discourage American consumers from buying products.

“Inflation expectations rose for firms’ own prices and for general inflation, with many firms expressing concern about the inflationary effects of potential tariffs,” wrote officials from the Federal Reserve Bank of Philadelphia.

Officials in Dallas said a few business contacts saw the election outcome as a key driver of optimism, but some were worried tariffs would impact international sales. 

What Businesses Are Doing In Response

Companies that work with imported products, such as electronics, shoes, cars, and fresh fruit and vegetables, are particularly worried.

Fed officials said uncertainty caused some businesses to refrain from making investments until policies are implemented or the countries come to an agreement. Business leaders reported stocking up on inventory before Trump’s inauguration in January to mitigate harm caused by potential tariffs.

“A computer retailer noted an increase in sales in recent weeks as business clients pulled ahead replacement plans to avoid expected higher prices for imported electronics,” Chicago Fed officials wrote.