Fed says trade tensions hit manufacturers and retailers

The US Federal Reserve said on Wednesday that its contacts in companies across the country feared that international trade tensions would weigh heavily on business, even though economic activity was resuming more and more.

The US central bank said its labor relations surveys indicated a "slight improvement" in the growth of economic activity, termed "modest" from April to mid-May.

The so-called "Beige Book" report from the Fed, a collection of anecdotes on the state of the economy, has reported many cases of companies citing the concern about by the commercial war of the Trump administration with China.

"The contacts in the corrugated packaging sector have reported a slow growth due to the ongoing trade dispute with China," the Fed said in its report, referring to the activity in the district of the Bank of the Federal Reserve St. Louis, located in the center of the country.

The report was prepared with information from business contacts until May 24, which means it has not generated any public outcry over last week's threat from US President Donald Trump to impose new tariffs on all Mexican imports if Mexico did not repress illegal immigration. America.

Already, the Fed's contacts in the Dallas Federal Reserve District service industries, home to many companies that trade with China and Mexico, have expressed concerns.

"Several contacts indicated a slowdown in demand growth if there was no resolution of the trade dispute with China, although a few were optimistic about the conclusion of a agreement that would benefit the United States in the long run, "according to the latest report from the Beige Book. , which was prepared by the Minneapolis Fed.

The US economy will mark 10 years of expansion in July, the longest ever recorded. However, increasing trade tensions between the United States and China have resulted in unchanged tariffs, restrained spending by US firms and exacerbated the slowdown in the manufacturing sector.

The Beige Book report pointed to employment growth nationally, as prices rose at a moderate pace in most of the 12 districts of the Fed.

Economists generally expect policymakers to consider tariff increases as a temporary problem. Investors are increasingly relying on the fact that the Fed will cut interest rates this year and some policymakers have suggested that this could be considered.

There is a growing fear that the trade war will harm the economy.

"Many contacts fear that higher tariffs on goods traded with China will only exacerbate the slowdown in manufacturing activity in China, resulting in lower demand for US goods from the US. from the Chinese manufacturers, "said the Fed in its report, citing contacts in the federal government's manufacturing industry in Cleveland. District of the reserve bank.