US factory owners are getting worried that Trump's trade war could tank their business

Mark Lyons/Getty ImagesPresident Donald Trump

  • President Donald Trump announced a slew of tariffs during the month of March.
  • According to ISM’s new manufacturing survey, executives at many US factories are starting to worry about the tariffs.
  • The tariffs are causing “panic buying,” said one executive.
  • Another said metal price jumps “will begin to impact our company’s performance.”

Executives at US manufacturing companies are getting wary of the possibility of President Donald Trump’s new tariffs triggering a trade war, according to a new survey published Monday.

According to responses in the latest Institute of Supply Management purchasing manager’s index, factory leaders and manufacturers are beginning to get nervous about the ever-increasing trade tensions and what the new tariffs could do to prices.

The index remained in strongly expansionary territory at 59.3 despite a drop from last month’s 60.8 reading. However, it missed an expectation of 60.1. (When the index is above 50, it indicates US manufacturers are expanding.)

Some survey respondents expressed concern about the effects of the newly announced tariffs. In March, Trump rolled out trade restrictions on imports of steel and aluminium as well as tariffs on $US50 billion to $US60 billion worth of Chinese goods.

“Many comments reflected the negative impact of the Asian holiday period, concerns about tariffs and difficulties in moving containers from ports to using locations,” Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said in the press release for the survey.

Respondents in industries ranging from chemicals to machinery expressed worries over the tariffs, but many said changes have not hit their businesses yet. Here’s a few responses from the survey regarding the tariffs:

  • An executive in chemical products: “We are concerned about the impact of tariff and trade wars on demand, but at this time, [there are] no signals that global demand is slowing,”
  • An executive in primary metals: “Significant price increases in the steel commodity due to 232 [the tariffs]. The price increases will begin to impact our company’s performance.”
  • A executive in machinery: “Much concern in the industry regarding the steel and aluminium tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers.”

Of particular interest is how the tariffs will push up prices, since the additional tax on imports of raw materials will likely increase input costs for many manufacturers that rely on metals or Chinese goods. According to the ISM index, prices jumped in the month of March and are already on the rise.

“The Prices Index registered 78.1 per cent in March, a 3.9 percentage point increase from the February reading of 74.2 per cent, indicating higher raw materials prices for the 25th consecutive month,” the survey said.

Based on the responses, executives for firms directly hit by the metals tariffs are already seeing serious consequences. For others, concerns about the second-order effects, including possible retaliation from other nations, is the dominant concern.

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