Trump’s Tariff Uncertainty Drags U.S. Manufacturing into Third Consecutive Month of Contraction—Imports and Exports Collapse

TradingKey - Amid the uncertainty surrounding Trump’s tariff policies, the U.S. manufacturing sector continued its contraction in May, with both import and export indicators hitting multi-year lows. Manufacturers and suppliers remain hesitant amid growing trade tensions and policy instability.

On Monday, June 2, data from the Institute for Supply Management (ISM) showed that the U.S. ISM Manufacturing Index fell to 48.5, down from the previous reading of 48.7 and below the expected 49.2. This marks the third consecutive month below the 50 threshold, indicating economic contraction—and the lowest level since November 2024.

U.S. ISM Manufacturing Index, Source: Trading Economics

Key Components Show Deepening Weakness

• New Orders Index: Dropped to 47.6, marking the fourth straight month of contraction.
• Imports Index: Plummeted 7.2 points to 39.9, one of the largest monthly declines on record and the lowest since 2009.
• Exports Index: Slid to a five-year low, signaling worsening global demand and trade tensions.

A transportation equipment manufacturer noted that while they have raised prices to protect margins, their collaboration with suppliers remains weak—leaving many manufacturers financially vulnerable.

The Supplier Delivery Index rose from 55.2 to 56.1, reaching its highest level since 2022, suggesting longer delivery times as suppliers express concerns over the impact of shifting tariff policies.

Wells Fargo analysts said that in the context of on-again, off-again tariff policy, most businesses are left sitting on their hands as they await any sign of more-persistent clarity.

Trade Tensions Rekindle Despite Geneva Agreement

Despite the U.S.-China Geneva agreement reached in mid-May, signs of renewed trade conflict have emerged.

On June 2, China’s Ministry of Commerce strongly rejected unfounded accusations by the Trump administration regarding alleged violations of trade commitments. It criticized the U.S. for introducing new discriminatory measures, including restrictions on AI chip exports, bans on EDA software sales to China, and revoking student visas for Chinese nationals.

Meanwhile, the European Union expressed strong regret over reports that the Trump administration plans to raise tariffs on steel and aluminum from 25% to 50%, warning it will prepare retaliatory actions accordingly.