Tariffs on the Menu: How Businesses Are Passing the Pain to Your Wallet—and What Investors Should Do Now

The Federal Reserve’s latest Beige Book is a wake-up call for investors: businesses are no longer just talking about tariffs—they’re already slapping surcharges on your morning coffee, your new sneakers, and even your smartphone. Let me break down the numbers and what they mean for your portfolio.

The Tariff Tsunami Is Here—And It’s Hitting Consumers

The Fed’s April 2025 report is unequivocal: 64% of businesses in the Cleveland Fed’s survey are bracing for tariff-driven cost spikes, with 75% of those firms planning to raise prices. This isn’t theoretical. Verizon’s CEO has openly warned that tariff hits will “hit the consumer,” while 3M just announced a $0.20–$0.40 per share financial penalty from tariffs—a hit they’re offsetting with selective price hikes.

Where the Pain Is Hitting—and How to Play It

The Fed’s sector-by-sector breakdown is a roadmap for investors. Start with retail: 82% of retailers reported tariff struggles, and smaller businesses in food, beauty, and wellness are in crisis mode. Avoid penny-pinching stocks here—this is a “survival of the fittest” moment.

But manufacturers and construction firms aren’t off the hook. The Beige Book notes 75% and 70% of these sectors, respectively, are feeling the pinch. Meanwhile, energy and agriculture are modest bright spots, with growth despite the chaos.

Big Companies Win, Small Ones Suffer

The Fed reports reveal a stark divide. Large corporations like Verizon and 3M can absorb tariffs through pricing power and diversification, but small businesses? 60% expect reduced demand, and many are one bad quarter away from folding. The takeaway? Stick with scale.

Regional Hotspots to Watch

• New York: Food and construction costs are soaring. Avoid regional retailers here.
• Midwest: Manufacturing is stalled, but agriculture is holding up.
• Southwest: Employment slowdowns and soft consumer spending mean caution for cyclical stocks.

The Fed’s Warning: Inflation Is Coming—and Investors Must Adapt

Chair Powell’s blunt assessment—“tariffs will generate a temporary rise in inflation”—is a call to action. Investors should:
1. Buy defensive sectors: Consumer staples (e.g., Procter & Gamble) and healthcare (e.g., Johnson & Johnson) with pricing power.
2. Avoid cyclicals: Autos, homebuilders, and discretionary retailers are sitting ducks for margin pressure.
3. Hoard cash for bargains: When panic hits, sectors like industrials (e.g., Caterpillar) could drop to buy levels.

Conclusion: The Tariff Tide Is Rising—Swim or Drown

The Fed’s data paints a clear picture: tariffs are here to stay, and businesses are passing the buck. 75% of affected firms are hiking prices, and 60% of small businesses are in dire straits. Investors who ignore this are rolling the dice.

The numbers don’t lie:
- Retailers: 82% in crisis mode.
- Manufacturers: 75% facing cost spikes.
- Large caps vs. small caps: 75% of big firms can offset tariffs; 60% of small ones can’t.

This isn’t just about tariffs—it’s about who survives when the squeeze hits. Stay aggressive with scale, defensive with essentials, and ready to pounce when others panic.

Stay tuned—this is just the beginning.