Manufacturing index slumps to lowest level of Trump’s presidency

A closely watched gauge of U.S. manufacturing slumped in May to its lowest level during President Trump’s time in the Oval Office as the rising costs of trade battles weigh on American businesses.

The Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) sunk to 52.1 percent last month, a 0.7 percentage point drop from April. The index measures new orders, production, employment, supply, and inventory building among hundreds of U.S. manufacturers. {mosads}

While manufacturing activity expanded for the 121st consecutive month and demand rose in May, declines in customer inventories, supplier deliveries and imports brought the PMI to its lowest point since October 2016.

“Overall sentiment” among respondents “remained predominantly positive,” according to Timothy R. Fiore, chair of the ISM survey committee. 

But the index “continues to reflect slowing expansion,” he added.

Several respondents to the PMI survey said the cost of Trump’s increasing tariffs on Chinese goods would weigh heavily on their profit margins, and expressed worries about the escalating U.S.-China trade war.

After trade negotiations between Trump and China broke down in May, the president hiked tariffs from 10 to 25 percent on $200 billion in Chinese goods. The White House also released a list of roughly $300 billion in Chinese products that Trump may subject to tariffs later this year.

Trump’s increased and proposed tariffs on Chinese goods are likely to raise prices on hundreds of consumers products as major retailers prepare to pass on costs to their customers.

And more pain could be on the way for U.S. manufacturers. The latest ISM survey concluded just two days after Trump announced he would impose a 10 percent tariff on goods from Mexico, which exported more goods to the U.S. in 2018 than any other nation.

Tariffs on Mexican goods would be a major blow to the U.S. auto and tech industries, which import and export parts and products back and forth with Mexican factories.