U.S. manufacturing activity contracted in March, marking a reversal from two months of expansion, as companies faced uncertainty surrounding President Donald Trump’s tariff plans, according to data released by the Institute for Supply Management (ISM) on Tuesday.
The ISM manufacturing index fell to 49.0% in March, a decrease of 1.3 percentage points from February. A reading below 50 indicates contraction in the sector. Analysts had expected the index to decline slightly to 49.8%.
“U.S. manufacturing activity slipped into contraction after a modest expansion in February,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “This marks the end of a brief period of growth following 26 consecutive months of contraction.”
The slowdown was driven by declines in both demand and production, with firms adjusting to uncertainty over tariff policies. Companies reported backlogs in new orders, slower delivery times from suppliers, and rising inventory levels, which they attributed to the tariffs.
Some respondents from the electronics and machinery sectors highlighted that customers were pulling in orders due to concerns about ongoing tariffs and pricing pressures. One respondent from the computer and electronics sector noted that the uncertainty surrounding tariff policies was leading to delayed decisions on new orders.
The upcoming announcement of reciprocal tariffs by President Trump, expected on Wednesday, has contributed to growing anxiety within the manufacturing sector. Economists have expressed concern that, if the tariffs are imposed as expected, the U.S. industrial sector may experience a sharp and immediate contraction.
This latest report reflects the ongoing challenges faced by the manufacturing industry, as companies navigate a complex trade and economic environment.
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