Tariff Pressure Continues to Impede Recovery, U.S. and European Manufacturing Remain Under Strain

Persistent weakness in U.S. demand combined with tariff measures that dampen factory orders have left major manufacturing economies struggling to recover. Data published Monday by the Institute for Supply Management showed the U.S. manufacturing PMI declined 0.4 points in October to 48.7, as new factory orders fell and supply‑chain pressures intensified, marking the eighth consecutive month of contraction in manufacturing activity.

The PMI, derived from a monthly survey covering production, new orders, employment and other sub‑indices, uses 50 as the expansion‑contraction threshold. Readings below 50 indicate shrinking activity. The U.S. manufacturing base is concentrated in higher value‑added sectors such as semiconductors, aircraft, engines and automobiles, and many plant operators attribute the demand shortfall to the uncertainty introduced by current tariff policies.

Although the Trump administration has positioned tariffs as part of a push to revive domestic manufacturing, the policy environment has coincided with a loss of higher‑skilled, better‑paid jobs and rising input costs, contributing to suspended capital expenditure and hiring decisions. On April 2 this year, the administration issued an executive order instituting so‑called reciprocal tariffs: countries with trade deficits against the U.S. or previously unspecified status face a 10% rate, those with agreements or modest surpluses face 15%, and countries without agreements that run large surpluses—cited examples include Brazil and India—face a 50% rate. Goods rerouted through third jurisdictions to evade tariffs would incur a 40% transit tax. Since the measures were implemented, global manufacturing has remained soft and downside economic pressure has increased.

Legal challenges to the tariff program’s legality are now before the courts, with the U.S. Supreme Court scheduled to hear arguments on November 5. Market observers and some within the administration have grown increasingly pessimistic about the likely outcome. A judicial defeat for the administration could cloud the outlook for global trade, prompt parties to seek unwinding of agreed arrangements and trigger cross‑border disputes; it could also require substantial refunds of collected duties, generating significant procedural disruption.

In Europe, factory activity across the Eurozone stagnated in October, with new orders roughly flat and employment falling. Germany, the region’s export engine, showed no recovery signal: its final October manufacturing PMI registered 49.6, matching expectations and the prior reading. Germany remains a leading exporter in sectors such as automotive, chemicals, machinery and electrical equipment, yet its Industry 4.0 ambitions have encountered substantial implementation challenges domestically.

The United Kingdom’s final October manufacturing PMI stood at 49.7, slightly above forecasts and the previous figure of 49.6; factory activity reached its strongest level in a year, but that improvement was largely driven by a temporary rebound following Jaguar Land Rover’s recovery from a cyberattack. Britain’s competitive manufacturing sectors include automotive, engines, aerospace, life sciences and information and communications technologies.

South Korea, the world’s tenth‑largest economy, recorded a decline with export orders weakening. During a recent visit to South Korea, President Trump disclosed approval for construction of a nuclear‑powered submarine to be built in the United States. Analysts note that, despite some progress in trade talks between the U.S. and several major Asian manufacturing economies, exporters in those markets remain cautious about demand prospects in the United States. Overall, the combination of subdued demand, trade policy uncertainty and elevated costs has left recovery prospects for key manufacturing regions fragile.