Washington (AFP) – Despite continued economic growth, US businesses and farmers are increasingly concerned about the trade spat with China which already has pushed prices higher, according to a Federal Reserve survey released Wednesday.
In the wake of the steep tariffs imposed last month by President Donald Trump, steel and aluminum prices have risen around the country, in some cases with double-digit increases, the Fed said.
Industries and retailers across the country also continue to report difficulty finding skilled workers, which in some cases is holding back growth, although wages have risen only modestly in response, the nationwide survey showed.
The 12 Federal Reserve districts reported “modest to moderate” economic growth over the past six weeks and a generally upbeat outlook but manufacturing, agriculture and transportation firms “expressed concern about the newly-imposed and/or proposed tariffs.”
The trade tensions have escalated in recent weeks, with Washington and Beijing exchanging increasingly severe threats — most recently with China’s tariffs on US sorghum. The dispute centers on US complaints about investment restrictions, theft of American intellectual property and overproduction of metals.
The Cleveland Fed reported steel prices had increased at double-digit rates in some cases, while across the country there were reports of companies stockpiling steel against further price hikes.
In the Boston region companies said the trade dispute represents “a major risk,” and already are seeing increased aluminum prices.
“These tariffs are now killing high-paying American manufacturing jobs and businesses,” one said.
And a contact in the Dallas Fed’s region said, “Trade issues continue to make agricultural producers and lender nervous.”
The Fed’s so-called beige book survey, which gathers reports from businesses across the nation, was prepared for the central bank’s first meeting of 2018, set for May 1-2.
– Worker shortage –
The shortage of workers continues to afflict business across sectors, regions and all skill levels, “restraining job gains in some regions,” the beige book said.
Some firms, especially in regions where the labor shortages are most severe, have begun raising pay and benefits, and also have increased overtime, improved training and even turned to automation to replace human workers.
One manufacturer in the Chicago Fed region reported increasing production at its facility in China “because they couldn’t find workers for their US operation.”
However, while the survey said wages and prices continued to rise at a “moderate pace,” they “generally did not escalate,” indicating the Fed does not need to raise the alarm about inflation just yet.
The central bank keeps a close watch on wages since those could feed into inflation, which has been running below the Fed’s two percent target despite falling unemployment and economic growth that has picked up steam.
The Fed raised its benchmark lending rate in March, and is expected to hike twice more this year, after three increases in 2017, as it tries to guide the economy on a path of continued growth without letting inflation accelerate.