President Donald Trump's aggressive push to protect domestic industry through tariffs is backfiring on the very sector it aims to defend, with the U.S. manufacturing economy shrinking for the sixth month in a row and businesses citing soaring costs, job cuts and planning chaos.
The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) for August stood at 48.7%, just above July's 48% but still below the key 50% level that signals expansion. Economists had forecast a modest rebound to 49%.
The only bright spot was a slight uptick in new orders. However, all other major subindices deteriorated.
Production and employment both declined, supplier deliveries slowed, and inventories of raw materials continued to shrink. Input prices increased, while both imports and exports contracted, reinforcing the picture of a sector under sustained pressure.
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Tariffs Slam US Manufacturing, Push Prices Higher
Business leaders surveyed by ISM drew a direct link between the sector's weakness and current tariff policy, with many voicing deep frustration over cost inflation and planning disruptions.
In transportation equipment, one respondent said the industry is in worse shape than during the 2008-09 Great Recession.
"There is absolutely no activity… This is 100 percent attributable to current tariff policy and the uncertainty it has created," the executive said, adding the industry is facing stagflation, where prices rise but output and demand fall.
The food and beverage sector flagged a 50% tariff on imports from Brazil and the USDA's removal of a sugar quota, saying it would drive up the cost of organic products.
‘Made In USA’ Now Harder Than Ever
Firms in electronics, machinery, and appliances warned that tariffs are doing the opposite of reshoring manufacturing.
One electronics company said efforts to relocate production back to the U.S. have stalled, as tariff-driven raw material inflation has made it financially unfeasible.
"We've implemented our second price increase. ‘Made in the USA' has become even more difficult… Total price increases so far: 24 percent," said an executive in the electrical equipment sector.
That company has already laid off 15% of its U.S. workforce — mainly high-skilled roles in engineering, marketing, design and IT.
"With no stability in trade and economics, capital expenditures spending and hiring are frozen. It's survival," the respondent added.
A computer hardware firm said unexpected tariff hikes — such as 50% duties on goods from India and other countries — have created chaos in planning, spiking development costs and triggering a review of sales prices just to preserve minimal margins.
Meanwhile, a chemical producer reported weaker orders across all product lines and lowered financial guidance for the rest of 2025, citing “too much uncertainty” from both tariffs and global economic trends.
In petroleum and coal products, surcharges imposed by suppliers now range from 2.6% to as high as 50%, eroding margins and adding volatility.
Market Reactions
U.S. stocks traded lower Tuesday after the Labor Day break, as fading risk appetite and renewed worries about stretched valuations and slowing economic momentum weighed on sentiment.
The S&P 500 slipped 0.85%, the Dow Jones Industrial Average dropped 0.63% and the tech-heavy Nasdaq 100 fell 0.96%.
Nvidia Corp. (NASDAQ:NVDA) declined 2%, heading toward a fourth consecutive loss — its longest losing streak since late March.
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