Economy

Trump’s Manufacturing Recession May Deepen

JM Ashby
Written by JM Ashby

The American manufacturing sector has been in recession since the fall of 2019 with factory orders and activity declining each month up to December and it appears that December won't be any different.

A closer look at manufacturing activity may not be available until next week, but the Commerce Department released a report this morning showing that the bottom fell out of business investment in December and orders for capital goods dropped to the lowest level since the spring of 2019.

Furthermore, orders for November were also revised lower.

From Reuters:

The Commerce Department said on Tuesday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, fell 0.9% last month as demand for machinery, primary metals and electrical equipment, appliances and components declined.

That was the largest decrease since April. Data for November was revised lower to show these so-called core capital goods orders edging up 0.1% instead of gaining 0.2% as previously reported. Economists polled by Reuters had forecast core capital goods would be unchanged in December.

Chinese and American officials have signed "phase one" of Trump's "biggest and greatest deal ever," but that's not going to make a significant difference in these numbers if it even makes any difference at all.

All of Trump's existing tariffs will remain in place while a slice of them is slightly reduced in value from 15 to 7.5 percent. China has supposedly committed to buying more American goods and that may slightly increase demand, but the fact is Trump's tariffs will still weigh on virtually every business that depends on industrial goods imported from China as inputs in their supply chains. Demand for machinery, metal, electrical equipment, appliances and others components all declined according to the Commerce Department and each of these things involve goods subject to tariffs.

Trump's tariffs and trade war is what depressed the manufacturing sector in the first place and none of it is going away. Repealing Trump's tariffs on foreign metal, for example, isn't even under discussion and "phase two" of Trump's deal will probably never happen.

The manufacturing recession may end at some point this year, I suppose, but I can't imagine what will spark enough demand to turn it around. And if Trump escalates his trade war with the European Union, the factory recession will likely last until Trump is out of office and the next session of Congress has a chance to pass stimulus.

  • b2blog

    Our biz orders are down significantly Dec and Jan.

  • muselet

    Weak business investment and the resulting slump in manufacturing have been on the radar of Fed officials who have blamed trade tensions, especially the White House’s 18-month trade war with China, and an uncertain global economic growth outlook for the malaise.

    A trade war can hamstring an economy. Who could have guessed?

    [T]he factory recession will likely last until Trump is out of office and the next session of Congress has a chance to pass stimulus.

    At which point, the Rs will suddenly become terribly concerned about the debt and deficit, and will demand that the US ignore the pleadings of the moochers and deadbeats (for which, read “manufacturing workers”) and cut its way to prosperity.

    The aftereffects of the Trump presidency will be with us for a very long time.

    –alopecia

  • katanahamon

    The economy has an inertia, it’s difficult to influence with any single action. However, sooner or later, all the negative actions Rump takes will tank it. Tariffs, gutting corporate regulations, tax breaks for the rich and corporations, further weakening of the financial strength of the middle and poor classes, gutting banking regulations that prevent crashes such as we’ve already experienced, instituting changes that further reduce disposable income by increasing our costs, yes..all these actions will have a detrimental effect. And the deficit(s) will not be mentioned as a problem until the very next Dem pres takes office.