Copyright Benzinga
Seven months after President Donald Trump unveiled his “Liberation Day” tariffs to shield domestic industries from foreign competition, the very sector they were designed to support has slid deeper into contraction, with key indicators flashing red across the board. According to the latest October data from the Institute for Supply Management, the U.S. Manufacturing Purchasing Managers' Index dropped to 48.7%, a level that not only marks continued economic shrinkage but also came in well below the 49.7% forecast. It's the eighth consecutive month of decline, and since February 2025, the index has remained stuck below the 50% threshold that signals growth. “In October, U.S. manufacturing activity contracted at a faster rate, with contractions in production and inventories,” said Susan Spence, MBA, chair of the Institute for Supply Management Manufacturing Business Survey Committee. See Also: Nvidia, Amazon Extend Rally, Bitcoin Sinks To $107,000: What’s Moving Markets Monday? A Broad Contraction Across The Manufacturing Sector Only two of the six largest manufacturing industries—food, beverage and tobacco products and transportation equipment—reported any expansion in October. Overall, 58% of manufacturing’s contribution to GDP contracted, and alarmingly, 41% of it is now in “strong contraction” territory, with PMI readings of 45% or lower. Key subindexes reveal the breadth of weakness. Production dropped sharply in October, falling to 48.2% from 51%, while employment rose slightly to 46% but remained firmly in contraction territory. New orders inched up to 49.4%, though they have now declined for two consecutive months. Meanwhile, the backlog of orders continues to shrink, despite a modest improvement to 47.9%. Employment has now been in contraction for nine straight months. For every firm hiring, more than three are cutting headcount or leaving roles unfilled. Meanwhile, import activity is sluggish—another sign of weaker demand—and exports continue to fall amid retaliatory measures from trading partners like China. Tariffs Backfire Multiple respondents in the ISM survey directly blamed tariffs and trade policy instability for reduced sales, operational strain and depressed demand. “Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S.,” said one executive in the Machinery industry. “Attempts to reshore have been unsuccessful.” From raw material costs to supply chain disruptions, the protectionist measures are weighing heavily. Prices remain stubbornly high, with the Prices Index at 58%, driven by tariffs on steel, aluminum and critical imports. "Volatility in commodity markets has tempered a bit… but tariffs continue to impact us day-to-day and our bottom line," a food, beverage and tobacco products respondent said. “Business continues to remain difficult, as customers are cancelling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape,” said a respondent in the Chemical Products industry. A firm in the computer and electronics sector suggested that, despite tariffs, importing often remains more cost-effective than domestic sourcing, with ongoing uncertainty around trade policy and higher equipment costs discouraging capacity expansion. Conclusion: The Cure May Be Worsening the Disease Despite intentions to bolster domestic manufacturing, the Trump administration's tariffs appear to be exacerbating the sector’s challenges. From inflationary pressures and trade friction to fragile demand, the policy shift has yet to produce the industrial revival promised. Now Read: Shutdown Nears Its End — But Economic Damage Is Mounting, Goldman Says Image: Shutterstock
