MINNEAPOLIS, MN – The U.S. economy has absorbed the largest tariff increase since the Great Depression better than expected, but new Minneapolis Federal Reserve research says the resilience partly reflects unusual trade patterns and strong artificial intelligence investment.
Researchers say importers front-loaded goods before announced tariff increases, temporarily boosting shipments. Tariffs also varied sharply by category, rising most on consumer goods and less on capital goods such as machinery and technology.
That difference matters for producers because U.S. agriculture depends on imported equipment, components and other capital goods. The researchers say tariffs on capital goods can reduce investment, labor demand and output even while restraining inflation compared with tariffs on consumer goods.
Artificial intelligence investment provided an additional offset. The model estimates that without the AI-driven investment boom, U.S. imports would have fallen 10% and gross domestic product would have contracted 0.7%.
The report says tariff composition will remain important as businesses plan investment. Higher duties on capital goods could create a larger drag on growth even if consumer-price effects appear smaller.
Farm-Level Takeaway: Tariff impacts on machinery, equipment and other capital goods could influence farm investment even when broader inflation effects remain limited.