An American flag flies over the Federal Reserve building, on May 4, 2021, in Washington.Patrick Semansky/The Associated Press
The U.S. Federal Reserve’s Beige Book is not the kind of document that sets hearts aflutter. It’s not a policy statement, a forecast or a peek into the minds of Fed officials, but a collection of anecdotes and observations from businesses across the country – a kind of economic scrapbook.
Published eight times a year, the Beige Book offers glimpses of how business leaders are navigating challenges such as recessions, pandemics and geopolitical uncertainty. And the latest report, released earlier this week, had “uncertainty” written all over it – 34 times, in fact – more than double the 14 mentions in the previous publication.
As the central bank’s 12 districts shared what they were hearing from businesses and consumers — about a week after the U.S. Conference Board’s Consumer Confidence Index recorded its steepest decline since 2021 — a picture is emerging of an increasingly cautious outlook in the United States as the White House sends mixed messages over the tariffs it intends to impose on importers of goods from Canada and Mexico.
We’ve already seen the impact of uncertainty in Canada. Major companies are scaling back production, selling off brands and assets, and economists are warning that prolonged unknowns could lead to reduced investment, stalled growth, and hundreds of thousands of layoffs.
But in the U.S., the Beige Book is colouring in around data showing spending is slowing as consumers and companies lose the energy to keep up with unpredictable policy shifts.
A search through earnings calls this week using AlphaSense revealed U.S. executives of small- to mid-sized companies were grappling with a more pronounced unease – which some traced back to President Donald Trump’s first threat of imposing steep tariffs on imports from Canada and Mexico. As he pushes back the deadline yet again to April 2, businesses are left navigating a world where the rules seem to change by the day.
Even the threat of new tariffs could push up consumer prices, unravel supply chains, and possibly nudge the economy toward a recession, the executives said — familiar fears for business owners in Canada.
Mike Speetzen, the chief executive officer of Minnesota-based recreational vehicle manufacturer Polaris Inc. PIF-T, said businesses of his size are struggling to navigate uncertainty – piled on top of shaky consumer confidence that took hold even before Mr. Trump raised the spectre of tariffs.
Auto-parts supplier Linamar wants permanent deferment of U.S. tariffs to avoid shutdown
“Consumers are struggling because they’ve got elevated debt levels. Interest rates are high. Inflation’s persistent,” he said. “If these tariffs remain in effect, especially with Mexico and Canada, inflation’s going to start to move back up. It certainly is getting worse, not better.”
His comments suggest more consumers are keeping their wallets closed at his business and among his network of suppliers and peers – a contagion that only adds to the pressures on companies trying to chart a course forward.
Marine and recreational equipment maker Brunswick Corporation, headquartered in Mettawa, Ill., said that a pullback might only grow worse. CEO David M. Foulkes said the new tariffs threatened by Mr. Trump could add US$70-million in annual costs for his company, on top of an existing US$30-million burden from previous trade policies and supply-chain disruptions.
“That is probably another $0.70 of EPS,” he said, referring to earnings per share – a key measure of a company’s profitability.
U.S. manufacturing and construction firms, too, are finding it hard to look ahead. Timothy Arndt, chief financial officer of Prologis Inc., a San Francisco-based logistics real estate company, said tariffs under Mr. Trump’s first term as president didn’t meaningfully boost U.S. manufacturing.
“When we step back and zoom out … we saw U.S. manufacturing increase about 2 per cent across that entire period,” he said.
For middle-market companies, the sense of walking on shifting ground is nothing new. An analysis by PYMNTS, an economic research firm, found that 28 per cent of companies with revenues between US$50-million and US$1-billion navigated significant uncertainty last year, with nearly half reporting diminished profits.
These companies, like their larger counterparts, are making tough calls about pricing, investment and strategy – all while trying to keep their footing in a volatile market.
If the future is uncertain, perhaps the anecdotes captured by publications such as the Beige Book will become more valuable: a clear look at the real-world effects on businesses and consumers, as hard as they might be to watch.
What questions do you have about tariffs?
The tariffs announced by U.S. President Donald Trump have upended decades of free trade in North America, causing chaos on both sides of the border.
Alongside the chaos come many questions about how this will affect Canadians' lives, and Globe reporters are here to help you navigate those. Perhaps you're curious about how this might impact the sector you work in, or maybe you'd like to know what this means for your mortgage. Tell us what you want to know about these new levies, and we'll do our best to answer. Please submit your questions below or send an email to audience@globeandmail.com with "Tariff Question" in the subject line.