June 29, 2018
- Businesses that responded to the Kansas City Federal Reserve's newest manufacturing survey expressed concern with President Donald Trump's trade policy.
- The tariffs are going to drive up prices and hurt production, the businesses said.
- "Bracing for the worst concerning China tariffs," said one executive. "We will move the last of manufacturing off shore."
US business owners have a lot to worry about, from workers to taxes, but nowadays a new concern is popping up: President Donald Trump's trade fights.
The Kansas City Federal Reserve released the results of its June manufacturing survey on Thursday which showed strong growth but serious concerns among business owners.
Based on the comments from manufacturing executives, there is a sense of dread that Trump's recent tariffs on steel, aluminum, and Chinese products could drive up prices and disrupt business activity. In fact, half of the business comments released by the Kansas City Fed focused on trade. Here's a rundown of those comments:
- "Business is strong right now, but tariffs and wage inflation may impact margins going forward."
- "The steel tariffs are not helpful. Material prices are rising and these costs have to be passed along to the consumer."
- "Bracing for the worst concerning China tariffs. We will move the last of manufacturing off shore. Loss of business due to tariffs will have a larger impact than interest rates."
- "Working on a record year, but we are closely monitoring price increases from suppliers due to new tariffs."
The prices for many of the goods hit by tariffs, most notably steel, have increased since Trump's decision to start down the protectionist trade path. Increased prices for businesses force those firms to either swallow the cost, hurting their profits, or pass the increase along to consumers. Either way, the inflation can slow down business activity and eventually produce a drag on the economy.
Additionally, the offshoring comments mirror the decision by the iconic motorcycle company Harley-Davidson to move some of its production outside of the US due to increased costs caused by Trump's trade fights.
The Kansas City survey reflects similar comments in other recent business surveys. The Dallas Fed's manufacturing survey, released Tuesday, also contained worries about the negative effects of Trump's tariffs.
"I can't believe the effect the tariff response has had on the metals trade," a fabricated-metal producer said in response to the Dallas survey. "Somebody needs their head examined if they think this is good for the American economy."