“Manufacturing has been in decline for six months, nearly the exact amount of time since Trump’s new trade wars began,” reports Reason Magazine:
The data are becoming impossible to ignore: American manufacturers desperately need relief from the very same tariffs that the Trump administration incoherently believes are helping American manufacturers.
That conclusion is evident from both results of a new survey of manufacturing companies’ CEOs and new economic data showing that manufacturing activity has declined for six consecutive months—the sort of slide over two economic quarters that typically meets the definition of a sector-wide recession. In short, both words and actions point to something being very wrong with American manufacturing since February, which just so happens to be when Trump announced the first of what have become many rounds of new tariffs on imported goods and raw materials.
Discussion of tariffs “continued to dominate commentary from manufacturers,” Reuters reported, citing several of the anonymous comments submitted by manufacturing firm executives as part of the ISM survey. “This is 100 percent attributable to current tariff policy and the uncertainty it has created,” reads one such comment. Another called the current economic conditions “much worse than the Great Recession.”
Meanwhile, a Dallas Federal Reserve survey of businesses released last week showed the vast majority of businesses say tariffs have caused harm and most believe that worse is yet to come.
Just 2.1 percent of the 329 businesses that responded to the Federal Reserve survey said that the tariffs have had a “positive impact,” while 47.7 percent said the effects have been negative. “The effect is most widespread in manufacturing, where more than 70 percent of firms noted negative impacts.”
In June, Bloomberg News reported on how tariffs are harming manufacturers in the news article “Trump’s Tariffs Aimed at Reviving Manufacturing Are Doing the Opposite“:
President Donald Trump’s signature trade policy is threatening to backfire by upending other top priorities: the revival of US manufacturing and the American Rust Belt.
In Illinois, Trump’s tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics.
The warnings underscore the rising worry that turbulence from Trump’s trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics.
Tariffs increased the costs to manufacturers of the raw materials and inputs they need to manufacture their products. Economists warn that tariffs shrink factory output when they apply to raw materials and components used by factories.
For example, tariffs on steel wipe out more jobs than they save, because “steel is produced by a tiny sliver of the economy, but used as an input by a much broader swathe of manufacturers,” notes Justin Wolfers, an economist at the University of Michigan.
Steel and aluminum tariffs have a history of wiping out more jobs than they save, by increasing the cost of production for American industries that use steel and aluminum as raw materials to make their products: The steel and aluminum tariffs Trump imposed back in 2018 shrank employment by 74,000 jobs, wiping out more jobs than they saved.
America does not produce enough aluminum to supply industries that use aluminum as a raw material to make their products. Nor does it even have the capacity to produce all the aluminum our industries need as a raw material. So when tariffs increase, these industries have to continue to buy imported aluminum, at a higher price due to the tariffs, in order to make their products. That cost increase from the tariffs makes it harder for factories to expand production, and cuts their profitability and ability to pay their employees a good wage.
