President Donald Trump intends to make the US a “manufacturing nation once again,” as he put it in his inaugural address, and he’s thrown up some of the highest import duties in a century ostensibly to help do so. Unfortunately, the available data generally suggest that we’re moving in the wrong direction.
A Federal Reserve Bank of Philadelphia report on Thursday showed that manufacturing business conditions plunged this month, echoing another report on factory activity in New York state. The Philadelphia Fed’s new orders measure fell to the lowest since 2020, and manufacturers expected to pay higher prices over the coming months. Taken together with an April survey from the Federal Reserve Bank of New York, Bloomberg Economics predicts that the closely-watched ISM manufacturing purchasing manager ..
Yes, these are just surveys, and yes, it’s still early days. For his part, Trump regularly highlights anecdotal promises of new US investments that he says were spurred by his policies. For instance, the president has touted a commitment by leading chipmaker Nvidia Corp. to produce “American-made AI supercomputers,” as well as a $100 billion joint venture between SoftBank Group Corp., OpenAI, and Oracle Corp. for AI infrastructure. The challenge is that companies have a way of saying the right t ..
First and foremost, investment requires certainty, and that’s hard to come by these days. At the time of writing, Trump has granted a three-month reprieve to many of the most highly tariffed countries, and product-level investigations and tariffs are still looming on vehicle parts, semiconductors and pharmaceuticals. The administration intends to hold bilateral talks with scores of trading partners in the coming months with the hopes of extracting concessions, possibly in exchange for lower
country-specific duties. Yet history shows that trade talks can take years to yield durable agreements, even when there are only two countries involved.It may take considerable time before companies even know the new rules of the game. Even then, they’ll wonder if any of the 2025 tariffs — levied without congressional approval — will stick once Trump leaves the White House in 2029. If the goal is more investment and manufacturing stateside, it’s extremely hard to imagine how we’ll get from Point B
Unambiguously, corporate profits are going to struggle in the interim. Both the New York and Philly Fed surveys show rising prices and expectations that they’ll increase further, while companies have dramatically pared back plans to expand their workforces. The firms will try to pass some of the higher input prices onto customers, but inflation-weary consumers can only take so much.
For a concrete example of the strain, look no further than health-care products maker Johnson & Johnson, which has estimated that tariffs will boost costs by about $400 million this year, mostly for medical devices. Not all manufacturers are created equal, of course, and smaller, more import-reliant firms may be among those that suffer the most. Although President Trump has said he’s willing to consider relief for some companies, larger firms tend to enjoy more access to the levers of Washinton power.
At best, firms may spend the next several quarters treading water, instead of investing in the future.
At the moment, many companies are stockpiling inventories of component parts that could face higher levies after Trump’s 90-day review. Prologis Inc., the industrial real estate giant, said there’s an urgent demand for overflow space from companies that are stocking up. Consumers may be getting in on the front-running, and that’s why light vehicle sales have been better than expected, according to Autoliv Inc., which makes airbags, seatbelts and steering wheels. This pull forward, though, borrow
With the pull-forward effect in full swing, it’s still plausible that the relatively dire sentiment expressed in surveys takes much longer to translate into the real economy. But what’s clear is that manufacturers aren’t making preparations for a new American “golden age.” On the contrary, they’re just trying to get through all the chaos of the here and now.
Source Name : Economic Times