Federal Reserve survey highlights tariff impacts, driver shortages

Recent tariffs on steel and aluminum and the continuing trade spat with China are now having an effect on economic activity across all regions, according to the Federal Reserve’s latest report on the domestic economy. In addition, Fed contacts both in and outside of the transportation sector cited driver shortages and rising freight costs as significant concerns in business performance.

The Federal Reserve’s Beige Book signaled that overall growth in the economy remained “modest to moderate” across all regions, which is generally unchanged from the last such report in early March. Most districts reported seeing moderate growth in consumer spending, employment, and manufacturing activity, keeping in line with the Fed’s general outlook of solid growth in the US economy.

About the Beige Book

The Federal Reserve’s Beige Book is summary of economic conditions across each of the 12 Federal Reserve Districts. Eight times a year, each Federal Reserve Bank collects anecdotal evidence on the state of the economy within its District. Responses are collected from Bank and District directors, as well as local industry contacts, economists, and other key market contacts. The Fed then collects and summarizes this information by district and sector.  

First commentary on tariffs

Despite the overall positive outlook on national economic conditions, tariff concerns dominated much of the commentary across sectors in the recent Beige Book release. Signs of disruptions from the steel and aluminum tariffs and the escalating feud with China have been cropping up over the past month, but the topic was conspicuously absent from March’s Fed policy meeting. As a result, the commentary in the Beige Book marks the first official Fed mention of the subject as a potential threat to growth in the economy.

One contact from Boston’s manufacturing sector noted that “thin gauge foil” is produced only in China and tariffs raised the price three-fold”. The contact then added “these tariffs are now killing high-paying American manufacturing jobs and businesses.” A tractor trailer manufacturer in the Minneapolis District shared similar thoughts, saying they “can’t raise prices as fast as materials cost.”

 The US' trade spat with China is creating uncertainty in many sectors
The US’ trade spat with China is creating uncertainty in many sectors

The Richmond Fed also noticed some adverse effects from steel and aluminum tariffs, citing a number of contacts who mentioned higher steel and aluminum prices in the aftermath of the tariffs. The Cleveland Fed echoed these sentiments, with one steel manufacturing contact noticing that its customers were attempting to stock up on steel in response to the tariffs.

For sectors outside of steel, aluminum, and their downstream industries, there were signs of increased uncertainty due to other proposed tariffs. Agricultural producers in several Districts noted that demand and profits remained relatively healthy, but both producers and lenders in the sector were nervous about potential tariffs instituted by China.

Driver shortages and the transportation sector

Responses from the Beige Book also made several mentions of the issues that driver shortages are having across regions. The Richmond Fed noted that trucking companies in its District were often faced with more freight than they could handle. Contacts in the district said that on several occasions, they were forced to turn away business because they were unable to meet demand.

Respondents in the Atlanta District transportation sector noted having to pay big bonuses and wage increases in order to attract drivers and curb turnover. Richmond District truckers echoed these comments and noted some better success over the past couple of weeks in terms of recruiting new drivers. This falls in line with some of the national results which show that trucking hires in general have picked up recently.

In addition, rising transportation costs and driver shortages were increasingly mentioned as concerns outside the transportation industry. Manufacturers in several districts noted that rising transportation costs were beginning to put pressure on their margins, forcing them to raise their own prices in an attempt to pass these costs on to their consumers. Respondents from the construction sector in the Cleveland Fed District cited rising transportation costs as one of the chief concerns currently facing the industry.

Much of this falls in line with some of the other survey data from recent months, as the current shortage of truck drivers is beginning to have a material impact on business performance. With manufacturers and construction workers facing generally healthy demand for their products and services, the inability to ship materials and products in a timely fashion due to lack freight capacity remains a major issue for businesses.  


Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.

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Ibrahiim Bayaan, Chief Economist & Market Expert

Ibrahiim covers developments and trends in the global economy. His focus is on understanding the links between movements in the macroeconomy and the implications for freight markets. Ibrahiim is also a one of FreightWaves’ Market Experts. Prior to FreightWaves, Ibrahiim spent nearly a decade building up the forecasting capabilities and creating the economic messaging at UPS. Ibrahiim and his family live in Atlanta, Georgia.

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