Tariffs Continue to Weigh Down Manufacturing: ISM®
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“Steel tariffs are killing us,” a manufacturing supply executive responded to the latest ISM® Manufacturing PMI® Report, as economic activity in the manufacturing sector contracted in September for the seventh consecutive month. Amid some talk of stagflation, this followed a two-month expansion preceded by 26 straight months of contraction, ISM reported Wednesday. The Manufacturing PMI® registered 49.1% in September.
“Business continues to be severely depressed,” responded a transportation equipment supply executive. He elaborated: “Profits are down and extreme taxes (tariffs) are being shouldered by all companies in our space. We have increased price pressures both to our inputs and customer outputs as companies are starting to pass on tariffs via surcharges, raising prices up to 20%.”
The executive noted: “The addition of the derivative steel and aluminum tariffs in the middle of the month (August) — with no announcement — was devastating.” He maintained that “interest-rate lowering or the ‘One Big Beautiful Bill’ will not impact our business,” because capital projects are on hold until there is greater certainty and customers start to place orders.
“We believe we are in a stagflation period where prices are up but orders are down due to tariff policy, and again, customers are not willing to pay the higher prices, so they are just not buying,” the supply manager said. “(We are) continuing to find ways to reduce overhead, which means letting go of experienced workers.”
In fact, in September, US manufacturing activity contracted at a slightly slower rate, with production growth the biggest factor in the 0.4-percentage point gain of the Manufacturing PMI®, according to Susan Spence, MBA, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “However, the combined drops in the New Orders and Inventories indexes (4.2 percentage points) exceeded the increase in the Production Index (3.2), rendering the Manufacturing PMI® improvement negligible,” she added.
Spence explained that August’s increase in new orders (an index gain of 4.3 percentage points from July to August) “seems to have flowed through to production but does not appear to be sustainable given the subsequent drop in new orders in September.”
ISM said that five manufacturing industries reported growth in September: Petroleum & Coal Products; Primary Metals; Textile Mills; Fabricated Metal Products, and Miscellaneous Manufacturing. The 11 industries reporting contraction in September — in the following order — were: Wood Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Paper Products; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Nonmetallic Mineral Products; Machinery; and Computer & Electronic Products.
Several other supply industry executives, as reported by the ISM, addressed the impact of tariffs:
“The tariffs are still causing issues with imported goods into the US. In addition to the cost concerns, product is being held up at borders due to documentation issues. The inflation issues continue; low volumes are a constant concern. The European region is not improving as we had expected, causing further concern for long-term business viability.” (Chemical Products)
“Ongoing macroeconomic conditions highlighted by interest-rate management and tariffs continue to impact customer purchasing decisions, resulting in subdued production rates and growing cost concerns on direct material and operations.” (Machinery)
“Lead times have slightly normalized, but tariffs continue to drive additional spend.” (Petroleum & Coal Products).
“Customer orders are depressed for heavy machinery because tariffs are so impactful to high-end capital equipment. Revenue expectations are flat for the rest of 2025, with no outlook to improve in 2026.” (Electrical Equipment, Appliances & Components)
“Tariffs still affecting vast amounts of increases in hardware, Al (artificial intelligence) and stainless steel. MRO (maintenance, repair and operating) products have continually increased, and the slowdown in agriculture has had stark impacts on bottom lines for raw materials.” (Fabricated Metal Products)
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