Dive Brief:

• While economic activity in the U.S. expanded last month, manufacturing companies expressed concerns about recently imposed tariffs in the Federal Reserve's latest Beige Book.
• Steel prices rose in many districts because of tariffs, the Fed said, with several manufacturers worried about trade policy uncertainty. Transportation costs also rose, as a result of higher fuel prices and a shortage of truck drivers. 
• In St. Louis, however, some steel and aluminum manufacturers announced plans to reopen their shuttered facilities. 

Dive Insight:

The Fed's report shows tariffs are clearly top of mind for U.S. businesses. The word "tariff" appeared 36 times — an enormous increase from the last Beige Book, which mentioned tariffs a whopping zero times.

While steel workers are cheering the tariffs, other industries have sharply criticized the proposed taxes. Some manufacturers went as far to say the tariffs "represent a major risk" and are "killing high-paying American manufacturing jobs and businesses." Economists warn tariffs will result in a net loss of jobs, with distribution and construction industries hit particularly hard.

In many regions, manufacturers described steel price increases as "sharp" and "dramatic," although the price hikes may be more related to rhetoric and trade war fears than an actual cost increase of the raw material. "Several manufacturers said that talk of steel tariffs immediately resulted in higher steel prices," the Fed stated.

Regardless, prices are up, leaving manufacturers to figure out a way to absorb the additional costs. Chicago manufacturers "expected to pass on about half of the increased costs to their customers," the Fed reported, showing the tariff effects trickling downstream through the supply chain.

But the process of raising prices takes time. A tractor trailer manufacturer said it "can't raise prices as fast as material costs." 

While the U.S. steel industry may be reaping the benefits of domestic sourcing and higher prices, the tariffs are also putting a squeeze on them to meet increased demand. A steel manufacturer in Cleveland said many of its customers were "stocking up" on steel, in anticipation of tariffs driving up the raw material's prices. 

Historically, tariffs have had minimal long-term impact on overall economic growth. But that doesn't mean businesses, at least in the short term, won't have to make major adjustments to their sourcing, pricing and operations.