US manufacturing activity hits multi-year lows as trade tensions weigh

Manufacturing activity in the U.S. fell to its lowest level in more than two years last month, as trade tensions and tariff threats weigh on businesses.

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The Institute for Supply Management’s [ISM] manufacturing reading for the month of May fell to 52.1 – the lowest reading since October 2016. A reading above 50 indicates expansion, but production, inventories and supplier deliveries all declined.

“Comments from the panel reflect continued expanding business strength, but at soft levels consistent with the early-2016 expansion,” Timothy R. Fiore, chair of the IRM Manufacturing Business Survey Committee, said in a statement. “Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive.”

A number of respondents cited tariffs as having an impact on their businesses, including those in the electronics, chemical products, petroleum and coal, as well as plastics and rubber product sectors.

In early May, the president threatened to increase tariffs on $200 billion worth of imports from China – which his administration followed through on. That measure was met by retaliatory action out of Beijing. He has also threatened to impose tariffs on an additional $300 billion worth of goods.

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The president also threatened to impose 5 percent tariffs on goods from Mexico last week in response to the battle over illegal immigration at the southern U.S. border, though this threat was not made during the timeframe under which manufacturers were surveyed.