Beige Book Suggests U.S. Businesses Fear Tariffs Will Trigger Economic Crisis

What’s the Beige Book? Chairman Mao’s Red Book and Colonel Gaddafi’s Green Book were more famous. But the Beige Book may soon become more infamous because it predicts an economic crisis.

Indeed, to investors, the Beige Book will soon be less bland than its name suggests—at least as far as 2018 goes. Suffice it to say, the Federal Reserve publishes the book eight times a year to outline the quality of business conditions and economic activity in the United States.

Apart from its bland name, another reason you may not have heard of the Beige Book is that it rarely causes a fuss. Now, however, is one of those rare exceptions. That’s because President Donald Trump’s tariffs are going to submit the alleged 4.1% economic growth rate to a severe test.

The July 2018 Beige Book raises an important issue, the potential damage that the tariffs will generate—from bilateral and multilateral trade disputes to full-on trade wars. (Source: “Factbox: Tariffs remain top worry in Federal Reserve’s ‘Beige Book’ business survey,” Reuters, July 18, 2018.)

Trump’s Tariffs Are Hurting American Businesses in America

The very types of business that Trump promised to help during his campaign are the ones voicing the loudest fears that the tariffs will trigger an economic crisis.

Companies in the manufacturing and construction industries (well familiar to Trump) have started to report trouble spots in their networks. Production costs have increased, and reciprocating tariffs are now making their goods less competitive.

The tariffs, given their suddenness and scope, have disrupted tried and true supply chains.

Machinery manufacturers having to deal with new tariffs on steel, for example, will endure higher costs simply due to having to change suppliers. Panic can set in, causing disruptions.