US manufacturing contracts again despite some tariff easing

WASHINGTON: US manufacturing remained in contraction territory in May for the third month in a row, according to survey data published on Monday, as uncertainty over US President Donald Trump’s tariff plans continued.

Since returning to office in January, Trump has hit most countries with a baseline tariff of 10 per cent, threatened dozens of trading partners with higher duties, and slapped sector-specific levies on steel, aluminium and autos not made in the US.

Against that backdrop, the Institute for Supply Management (ISM) manufacturing index declined to 48.5 per cent in May, extending its decline, and remaining firmly below the 50-point mark separating expansion from contraction.

The index for imports plunged 7.2 per cent from a month earlier, while the indices for inventories and new export orders also saw steep declines. The survey data was in line with the market consensus, according to Briefing[dot]com.

“Contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken,” ISM survey chief Susan Spence said in a statement. Tariffs were front of mind for many of the businesses who responded to the survey.

One firm in the computer and electronic products sector told ISM that government spending cuts or delays and tariffs were “raising hell with businesses”. Another company in the chemicals sector said most suppliers were simply passing on the cost of tariffs “at full value”.

“The position being communicated is that the supplier considers it a tax, and taxes always get passed through to the customer,” they continued, adding: “Very few are absorbing any portion of the tariffs.”

The new levies are not only causing higher prices, however, with one firm warning of a severe supply crunch “rivaling that” of the Covid-19 pandemic.Despite fierce criticism from many businesses, the White House continues to insist that any pain from tariffs will be short-lived, and that it forms just one plank of an overall economic strategy to boost growth which includes tax cuts and deregulation.