Federal Reserve chairman Jerome Powell. Photo: Reuters / Joshua Roberts

US Federal Reserve policy makers highlighted apprehension among the business community that the Trump administration’s trade policy could weigh on the economy, minutes of their latest meeting revealed.

“[Many contacts] expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity,” the text, which was released on Thursday, said.

“[Some] indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy. Contacts in the steel and aluminum industries expected higher prices as a result of the tariffs on these products but had not planned any new investments to increase capacity. Conditions in the agricultural sector reportedly improved somewhat, but contacts were concerned about the effect of potentially higher tariffs on their exports,” it went on.

The minutes from the June meeting came out just hours before tariffs on US$34 billion worth of Chinese imports were set to be imposed by the US, with matching retaliatory tariffs expected to follow.

Participants in the meeting were largely optimistic about the shape of the economy, though there was also concern of the economy overheating.

“Some participants raised the concern that a prolonged period in which the economy operated beyond potential could give rise to heightened inflationary pressures or to financial imbalances that could lead eventually to a significant economic downturn,” the statement said.

US stocks were little moved by the minutes, which reaffirmed a gradual path of rate hikes, holding on to earlier gains.

Despite the looming tariff move, there was some market optimism on trade Thursday morning with news that there may be an appetite in Europe for negotiations on lowering auto tariffs.