Federal Reserve: Businesses Are Not Passing Along Costs of Tariffs or Higher Wages

American businesses face higher costs from tariffs and a tight labor market but much of these are not getting passed along to consumers, according to a Federal Reserve report released Wednesday.

“Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs. However, firms’ ability to pass on cost increases to final prices was restrained by brisk competition,” reported the Fed’s Beige Book survey.

Critics of the Trump administration’s tariffs initially claimed that they would hurt consumers by driving up prices. Those claims have become far less credible as inflation has stayed very low and the prices of many goods thought to be affected by tariffs have not jumped. The prices of light trucks–including popular SUVs–has fallen 0.2 percent over the past 12 months.

One exception, however, appears to be the Boston area. “In general, contacts said they were able to pass the tariff costs onto their customers,” the Boston Fed said.

A North Carolina furniture manufacturer was unable to pass tariff-related cost increases on to customers, the Richmond Fed said. Contacts in the auto industry told the Chicago Fed that automakers and suppliers were not yet passing on much of their higher costs related to tariffs.

The Beige Book an anecdotal report of business activity in the central bank’s 12 regional districts. Officials at each of the Federal Reserve Banks gather information about their districts by reaching out to business contacts in a wide variety of industries.

“The outlook generally was positive for the coming months, with expectations of continued modest growth despite widespread concerns about the possible negative impact of trade-related uncertainty,” the Fed said in the last edition.

The report suggests there is very little danger of the economy slipping into a recession in the coming months. The current economic expansion is now officially the longest on record.

Consumer spending is giving the economy a good deal of support. Factory activity, however, is not growing much. The Federal Reserve banks in Richmond and Atlanta say economic growth picked up in recent months.

With no signs of a pickup in inflationary data, there’s little in the Beige Book that is likely to make the Fed hold back from cutting rates at its policy meeting in two weeks.