Economic activity expanded slightly to moderately across the Federal Reserve’s 12 districts during late November and December, yet concerns over looming changes to U.S. immigration and tariff policies cast a shadow on the future, according to the Fed Beige Book released Wednesday.

The latest Fed Beige Book report highlighted moderate growth in consumer spending, strong holiday sales and rising wages.

According to anecdotal economic insights from businesses and other contacts across the country, several Fed districts showed potential economic headwinds tied to expected policy shifts under President-elect Donald Trump.

How Expected Tariffs, Immigration Policies Shape Business Sentiment

Businesses are increasingly wary of the Trump administration’s plans to tighten immigration rules and impose steep tariffs. Trump has floated the idea of raising tariffs on Chinese goods to as much as 60% and applying 10% universal tariffs on imports from other nations.

The manufacturing sector appears particularly vulnerable, with contacts reporting efforts to stockpile raw materials in anticipation of higher tariffs.

Additionally, some businesses fear that restrictions on immigration could exacerbate labor shortages, especially in industries like construction and agriculture.

Business leaders across industries within the New York Fed District “expressed concern that potential import tariffs would push up prices,” the Beige Book stated.

In the Richmond Fed District, firms from various sectors expressed concerns and uncertainties about tariffs, port worker strikes and overall economic conditions heading into the new year.

Wage Growth Picks Up, Inflationary Pressures Remain Modest

The labor market showed signs of strength, with wage growth accelerating to a moderate pace across most districts. Yet businesses reported growing uncertainty about future staffing needs, especially in light of potential policy changes.

Prices rose modestly overall, with businesses reporting a mix of flat, moderate or even declining selling prices in certain sectors like retail and manufacturing.

Input costs, particularly for health insurance and fuel, continued to climb, and some contacts predicted that higher tariffs would contribute to broader inflation in 2025.

While inflationary pressures remain contained for now, many businesses are bracing for price hikes if the new tariffs go into effect.

The agricultural sector struggled under weak farm incomes and adverse weather conditions. The spread of avian flu further tightened egg supplies, leading to a spike in prices. Energy activity, meanwhile, was mixed, with optimism about 2025 tempered by uncertainty over global demand.

Despite these challenges, the Beige Book revealed cautious optimism for the year ahead. More contacts reported a positive outlook for 2025 than a negative one, reflecting the resilience of the U.S. economy in the face of shifting political landscape.

Market Reactions

Markets showed little reaction to the Fed Beige Book release. The S&P 500, tracked by the SPDR S&P 500 ETF Trust ( SPY ) , maintained its session gains of 1.8%.

Tech stocks rallied further during early afternoon trading in New York. The Invesco QQQ Trust, Series 1 ( QQQ ) was 2.3% higher, eyeing its strongest session since Nov. 6, 2024, when tech stocks showed a post-election rally.

The U.S. dollar index was also little moved, with the Invesco DB USD Index Bullish Fund ETF down 0.1% for the day.

Crude oil added gains, with the West Texas Intermediate light crude up by over 3% to $80 a barrel by 2:20 p.m. ET.

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