Shoppers in Walnut Creek, California, USA on Tuesday, October 7, 2025.
David Paul Morris | Bloomberg | Getty Images
President Donald Trump’s tariffs have left companies torn between absorbing costs and passing them on to customers, causing inflation to rise across the board, the Federal Reserve said in a Wednesday report.
The central bank’s Beige Book periodic report, typically published eight times a year at about six-week intervals, classifies overall economic growth as “little changed” since its last report on Sept. 3. The labor market is “mostly stable” as demand is “subdued” in most of the Fed’s 12 districts.
But when it comes to prices, President Trump’s mandates, which went into effect in April and were phased in over the next several months, had an impact.
“Prices further increased during the reporting period,” the report said. “Increased input costs due to tariffs were reported in many districts, but the extent of cost increases reflected in final prices varied.”
In some cases, companies held prices steady to remain competitive and appease inflation-sensitive customers. However, he said some companies are “passing on the increased import costs entirely to their customers.”
Some districts reported material prices actually falling due to slowing demand.
The trade war has escalated in recent days as China ordered restrictions on much-needed rare earth materials and President Trump retaliated with threats to impose 100% tariffs on imports from China.
The announcement comes as the government shutdown enters its third week and relevant economic indicators are lacking. Key institutions such as the Labor Department and the Department of Commerce are largely closed due to the impasse.
But Bureau of Labor Statistics officials were recalled to release the all-important Consumer Price Index report, which is used as an indicator of inflation and as a cost-of-living adjustment measure for Social Security recipients. The CPI data, which would normally be released on Wednesday, will be released on Oct. 24 and will be the last inflation rate the Fed will receive before its Oct. 28-29 policy meeting.
The Beige Book notes that although consumer spending has fallen slightly in recent weeks, there has been “strong” spending by high-income earners on luxury goods and travel. Meanwhile, low- and middle-income earners pursued discounts and promotions.
Although Philadelphia reported wariness about a prolonged government shutdown, expectations for the future improved in some neighborhoods.
