The U.S. agreed to keep the current 10% tariffs on over $200 billion worth of Chinese goods while an agreement is negotiated, but will increase to 25% if no agreement is reached prior to the 90-day deadline.
In the meantime, the negative effects of the trade wars are already showing themselves in the Federal Reserve’s Beige Book, which summarizes economic activity reported from various district banks:
- Boston Fed: “Also, three manufacturing firms faced higher input prices due to tariffs on Chinese goods and services that were not readily substitutable, and the firms expected to pass on (or had already passed on) to consumers at least some of the tariff burdens.”
- Philadelphia Fed: “Other firms reported difficulty meeting the prices of foreign competitors who are not exposed to tariffs on the primary input commodities of their products.”
- Cleveland Fed: “The majority of contacts attributed at least some of these increases to import tariffs. One trucking contact noted that prices for pallet jacks, tires, and packaging material were higher because of the tariffs.”
- Chicago Fed: “Contacts reported a notable drop in Chinese purchases of US soybeans following an increase in Chinese tariffs.”
- Dallas Fed: “Among manufacturers, roughly 60 percent of contacts said the tariffs announced and/or implemented this year have resulted in increased input costs. The share was even higher among retailers, at 70 percent.”
Until an ironclad trade deal can materialize between the two nations, trade talk could continue to permeate the markets through 2019.
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