WASHINGTON, January 3, 2020 – For the fifth straight month, the U.S. manufacturing industry has contracted and experts agree that the trade war and tariffs are a primary driver for this continued weakness. The Institute for Supply Management’s (ISM) index dropped to 47.2, the lowest level since June 2009. Americans for Free Trade, a coalition of more than 150 associations from every sector of the economy that are united in the fight against tariffs, released the following statement from spokesperson Jonathan Gold in response to today’s ISM Manufacturing Report:
“Rather than helping, like some continue to claim, tariffs are significantly damaging American manufacturers. That’s because American businesses like manufacturers are the ones paying the tariffs – not China. And they are the ones suffering from the uncertainty and volatility the trade war creates. While the Phase One Deal shows some positive movement, today’s ISM report reiterates the need for the president to come to a final deal with China that removes all tariffs on American companies.”
Today’s ISM report comes on the heels of a new study released by the Federal Reserve earlier this week, which found “the tariffs imposed by the Trump administration in 2018 led to higher prices and fewer manufacturing jobs.” It went further to explain that tariffs are not “worth” the short-term pain because they actually hurt American businesses:
“While one may view the negative welfare effects of tariffs found by other researchers to be an acceptable cost for a more robust manufacturing sector, our results suggest that the tariffs have not boosted manufacturing employment or output, even as they increased producer prices.”
BACKGROUND
ISM Drops To 47.2 In December 2019, The Lowest Level In More Than A Decade. “Manufacturing activity in the U.S. contracted to its lowest level in more than a decade last month even as China and the U.S. showed progress on the trade front. The Institute for Supply Management said Friday its manufacturing index fell in December to 47.2. That’s its lowest level since June 2009, whet it hit 46.3. Economists polled by Reuters expected a reading of 49 for December. Anything below 50 represents sector contraction.” (Fred Imbert, “Manufacturing economy weakest in a decade as December ISM index comes in at 47.2,” CNBC, 1/3/20)
American Manufacturing Company Pays A Higher Tariff Rate To Manufacture Speakers In The United States Than It Would To Manufacture Speakers in China. “His factory is still in Minnesota, but it depends on some components imported from China. Since last fall, the company has had to pay tariffs on those components — tariffs that are now 25%. Ironically, if Digre built whole speakers in China, like some of his competitors do, he’d have to pay only a 15% import tax…The trade war has contributed to a slowdown in manufacturing in recent months. U.S. factory activity has declined for four consecutive months.” (Scott Horsley, “His Company Makes Speakers. Now He’s Speaking Out, Opposing Tariffs,” NPR, 12/2/19)
Manufacturing Constricted For The Fourth Month In A Row In November. “November was the fourth consecutive month of PMI® contraction, at a faster rate compared to the prior month. Demand contracted, with the New Orders Index contracting faster, the Customers’ Inventories Index remaining at ‘too low’ levels and the Backlog of Orders Index contracting for the seventh straight month (and at a faster rate). The New Export Orders Index returned to contraction territory, likely contributing to the faster contraction of the New Orders Index.” (November 2019 Manufacturing ISM Report on Business, Institute for Supply Management, 12/2/19)
“Manufacturers Have Borne The Brunt Of The U.S. Trade War With China.” “Big picture: Manufacturers have borne the brunt of the U.S. trade war with China. The dispute between the world’s two largest economies have disrupted global supply chains and contributed to a broader global slowdown.” (Jeffry Bartash, “U.S. manufacturers still suffering from China trade fight, tepid global economy, ISM finds,” MarketWatch, 11/1/19)