Oct 6, 2019 - Economy

Business leaders spooked by Trump's manufacturing slump

Data: Bureau of Labor Statistics; Chart: Axios Visuals
Data: Bureau of Labor Statistics; Chart: Axios Visuals

American manufacturers rode a wave of optimism after President Trump took office, clinging to his promises to revive the industry and bring back jobs.

Yes, but: The politically important sector is being choked by his trade war with China, and business leaders tell Axios that the tariffs threaten to upend the economy if not addressed soon.

Driving the news: The manufacturing sector added 18,000 jobs in September of last year, following a steady rise in employment.

  • But just one year later, the pace of gains has slowed: Last month, the sector cut thousands of jobs for the 2nd time this year.
  • A closely watched index that tracks the health of the industry also showed that manufacturing is in the worst shape since before President Trump took office — contracting for 2 straight months. The last time the sector contracted was in 2016.

And while President Trump has blamed the Federal Reserve for the slump, and White House economic adviser Larry Kudlow punted responsibility to Europe, business groups and manufacturers say there's no question Trump's trade war is the real problem.

White House spokesperson Judd Deere told Axios: "The fundamentals of the economy are strong because of this president’s pro-growth policies, and the White House does not see an imminent economic downturn." 

  • "Talks with China are continuing this week, but there is no doubt that President Trump will continue to use every available tool to level the playing field and reduce barriers to the export of our goods and services."

The U.S. Chamber of Commerce's chief policy officer Neil Bradley, who has worked closely with the Office of the United States Trade Representative on the Trump administration's pending trade agreements, tells Axios he's been "concerned about the outlook for the manufacturing sector for some time now."

  • "When businesses begin to decline, one of the first sectors to be impacted by that is manufacturing," Bradley said. "The next few months are critical. Either confidence [in the markets] is going to be restored, or that lack of confidence from the tariffs will continue to spread. And that's when you risk a recession."
  • Meanwhile, the president of the National Association of Manufacturers, Jay Timmons, said that optimism among their members is declining — and the lack of clarity surrounding USMCA and tariffs has put “a chill on business investment decisions” in the sector.

The bottom line: Counties with local economies that rely on manufacturing overwhelmingly supported Trump in 2016 and celebrated the "Trump bump" that accompanied him when he took office. But those votes could be in jeopardy as uncertainty continues to grip the industry.

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