President Donald Trump's trade tariffs are already hitting hard - at home.
The tariffs, which the Trump administration has imposed on exporters from China to Canada and Europe in an effort to reduce the U.S. trade deficit, already have increased the price of raw materials and other "input" costs for some 68% of manufacturers in the New York area, according to a new survey by the Federal Reserve Bank of New York released Thursday.
What's more, about half of manufacturers expect to increase selling prices as a result of the changes in trade policy, according to the New York Fed survey, conducted earlier this month.
"In assessing the overall effect of trade policies on the bottom line, 51 percent of manufacturers perceived a negative effect in 2018, while 44 percent anticipated a negative effect in 2019," according to a summary of the results.
The New York Fed's report is among the first to highlight the early effect of the president's tariffs on the economy. While Trump says his campaign to reduce the $552 billion U.S. trade deficit will protect domestic industries and create jobs, business groups including the U.S. Chamber of Commerce and National Retail Federations have argued that the policies will simply drive up prices for American consumers.
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The new survey's results also could have implications for the Federal Reserve, which has been raising interest rates since 2015 to prevent inflation from spiraling out of control as the economy heats up. The U.S. unemployment rate is already close to an 18-year low, and some economists believe the tight labor market could spur faster wage increases, in turn adding to the inflation rate.
So any price increases passed along by manufacturers due to the import tariffs could spur even more inflation -- putting more pressure on the Fed to act.
Minutes from the Federal Reserve's monetary-policy meeting in July showed that officials were fretting then over the potential economic damage from Trump's trade war; some of the officials reported that executives in the various U.S. regions were delaying plans to invest in new plants, equipment and other expansion efforts because of the threat to the economy from a full-blown trade war.
And in a blog post earlier this week on the website of the Fed's New York branch, a team of researchers argued that the imposition of import tariffs would bring "little or no improvement in the trade deficit." That's because import tariffs raise the cost of supplies and raw materials for domestic manufacturers, in turn making it more expensive to produce goods for export, the researchers wrote.
White House economic adviser Larry Kudlow told CNBC on Thursday that the U.S. and China would resume trade talks later this month, though he warned that the president is committed to "toughness."