Key Takeaways<\/p>\n
One benefit of U.S. tariffs on foreign imports is that they are supposed to spur an increase in domestic manufacturing. So far, tariffs seem to be having the opposite effect.\n<\/p>\n
A closely followed survey of manufacturers indicated that the sector contracted for the sixth straight month in August, despite some signs of improvement. However, the data also showed that manufacturers struggle to handle the impact of tariffs while contending with higher prices for materials and lower spending from cautious buyers.\n<\/p>\n
The Institute of Supply Management (ISM)<\/a> manufacturing sector\u00a0Purchasing Managers\u2019 Index (PMI)<\/a> improved to 48.7 in August, but still fell short of the 50 mark that indicates growth. The data showed that high input prices and elevated supply pressures from tariffs helped to wipe out improvements in new orders and employment levels.\n<\/p>\n \u201cUncertainty around tariff policy is limiting activity,\u201d wrote Wells Fargo economists Shannon Grein and Tim Quinlan. \u201cWhile the higher costs associated with tariffs are a challenge, the uncertainty around where tariffs ultimately land is likely more so limiting current activity today.\u201d\n<\/p>\n High Costs Weighing on Domestic Manufacturing <\/p>\n Business leaders who responded to the survey said they’re feeling the impact of tariffs. Some businesses said the higher costs made domestic manufacturing more difficult, despite the goal of bringing factories back to the U.S.\n<\/p>\n \u201cTariffs continue to wreak havoc on planning\/scheduling activities,\u201d a respondent from a computer and electronic products business said. \u201cPlans to bring production back into the U.S. are impacted by higher material costs, making it more difficult to justify the return.\u201d\u00a0\n<\/p>\n Some tariffs target goods from a certain nation, like the recently enacted 50% tariffs on India<\/a>. Others have targeted materials like metals<\/a> and wood<\/a>.\u00a0\u00a0\n<\/p>\n \u201c\u2018Made in the USA\u2019 has become even more difficult due to tariffs on many components,\u201d an electrical equipment and appliances manufacturer said in the survey, noting that the company has laid off about 15% of its U.S. workforce. \u201cThe administration wants manufacturing jobs in the U.S., but we are losing higher-skilled and higher-paying roles. With no stability in trade and economics, capital expenditures and hiring are frozen.\u201d\n<\/p>\n