The Federal Reserve's latest Beige Book report reveals that tariffs implemented by the Donald Trump administration are translating into higher costs for businesses, with the financial burden increasingly being passed on to consumers.
However, the report details an economy that “changed little on balance,” with one analyst highlighting that the broader risks of a recession remain low.
Trump’s Tariffs Are Causing Price Hikes
The October 2025 summary indicates that tariff-induced price hikes were reported across many of the Fed's districts. While some businesses absorbed the initial shock to protect market share, others in manufacturing and retail have begun “fully passing higher import costs along to their customers”.
This has led to price-sensitive behavior, with the report noting that “lower- and middle-income households continued to seek discounts and promotions in the face of rising prices and elevated economic uncertainty”.
The economic landscape remains varied, with three districts reporting slight growth, five seeing no change, and four noting a slight softening of activity.
Rising Costs Will Be A ‘Greater Burden’ For Consumers
Eric Teal, Chief Investment Officer for Comerica Wealth Management, observed that companies are running out of ways to mitigate the duties.
“Ultimately, it is likely the inflation-fearing consumer will bear an even greater burden of the tariff costs,” Teal stated in his commentary.
Government Shutdown To Amplify Weakness?
The report’s findings cover a period before the recent government shutdown, a factor that could worsen the slowdown. According to Jeffrey Roach, Chief Economist for LPL Financial, the “slowdown started before the government shutdown, which will only exacerbate the weakness.”
He noted that waning demand has pushed down prices for some materials like steel and lumber.
Recession Remains ‘Well-Contained’
Despite these headwinds, Roach believes the economy will avoid a severe downturn. “Firms continue to experience a slowdown in business activity,” he said. “Recession risks still appear well-contained.”
This sentiment is supported by a largely stable, though muted, labor market, where employers favor temporary over full-time hires. Roach anticipates the Federal Reserve will continue its course of action, stating, “we expect the Fed to continue to cut rates in the remaining two meetings of this year.”
Price Action
The S&P 500 index ended 0.40% higher at 6,671.06 on Wednesday, whereas the Nasdaq 100 index advanced 0.68% to 24,745.36. On the other hand, Dow Jones fell 0.037% to 46,253.31.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Wednesday. The SPY was up 0.44% at $665.17, while the QQQ advanced 0.71% to $602.22, according to Benzinga Pro data.
On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading in a mixed manner.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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