Economy

Trump’s Trade War Drives Factory Orders to a Six Month Low

JM Ashby
Written by JM Ashby

Manufacturing output fell to a six month low in October according to the Institute for Supply Management, and while that may not necessarily be cause for alarm by itself, I believe the reason for the drop is.

Industry managers say factory orders have dropped because of Trump's trade war and, more specifically, they say it has increased the cost of virtually everything from individual products to shipping.

From the Wall Street Journal:

“All electronic components are having shortages and much longer lead times that impact our production,” said one purchasing manager in computer and electronic products.

“Tariffs are causing inflation: increased costs of imports, increased cost of freight and increased domestic costs from suppliers who import,” said a manager in chemical products.

A plastics and rubber products manager: “NAFTA 2.0/USMCA does nothing to help our company, as it does not address Section 232 tariffs.”

Factory orders may briefly rebound in November or December for all we know, but what we do know for sure is that the conditions that led to this are about to get much worse.

Bloomberg reported on Monday that Trump will announce that he's imposing tariffs on all remaining products imported from China (about $260 billion in goods) in December and the list of products that haven't already been taxed includes many electronic components. We also know that Trump's tariffs on $200 billion in Chinese goods will automatically increase from 10 to 25 percent on January 1st, so industry managers who are already struggling to deal with increased costs are in for a rude surprise.

Analysts who spoke to Reuters last week also say they expect consumer spending will slow during the first half of 2019 so, if we put two and two together, it doesn't look good.

Our economy is still strong despite everything Trump has done to obstruct it, but it can't last forever. I'm obviously not an economist, but it feels like the economy President Obama built could finally succumb to Trump's whimsy and Republican mismanagement at some point in the next year. The biggest question for me is if we'll have a regular old recession, or if we're going to relive 2008.

In any case, I expect the 2020 election will be accompanied by economic turmoil in one form or another. If it's not a recession, it could be a $2 trillion deficit. It could be both.

  • muselet

    I wonder if Vladimir Putin is having buyer’s remorse right now. If Donald Trump crashes the US economy, which he seems bound and determined to do, the world economy will follow, and even a mid-sized economy like Russia’s will suffer.

    Digging out from under the mess Trump and the Rs are creating will not be a fun task.

    –alopecia

  • So the price of computers and computer accessories will go up. This will not only hurt consumers but businesses as well.