Call me crazy, but how do tariffs, which are designed to PROTECT American manufacturing jobs, cause a slow-down in manufacturing? Huh? Sure, tariffs will likely lead to some price increases, but I don’t logically see how putting a fax on FOREIGN manufactured goods is going to lead to AMERICAN factories laying people off.
What is happening is we are seeing a GLOBAL slowdown in the GLOBAL economy. That is what some on this site are missing (and it's not some big BLS conspiracy). This is called the business cycle. People here are failing to remember that US manufacturers don't just deal with the realities of a trade war - but with a global economy.
SO: We export about $2.5 TRILLION a year in goods. About $1 trillion of that is in the manufactured category.
OK - so If there is a GLOBAL economic slowdown - which there is (Europe is tanking HARD...and China is tanking badly as well) - then there is LESS of a demand for manufactured goods. PMI will lead the way in showing whats coming - JOBS data will lag.
As to your question about the trade war and who it will impact the PMI - it does it like this: It makes factories nervous....given the slow down in Eurpoe and Asia ALREADY (China and Japan). If a factory thinks the trade war will HURT China (which is basically what Trump is really trying to do I think - he's repeating what Reagan did with the Soviets): Why would they maintain the same production level if nobody will buy their goods at the same rate? They won't have anyone to export them to. They won't have buyers in Europe or Asia - the two top importers of their goods. SO - they are putting on the brakes.
We saw a collapse last spring in the Baltic Dry Index (BDI) - which is the global shipping index. Now we are seeing a spike but yet manufacturing is falling. We've seen this before. What that USUALLY means is that manufacturers are rushing their goods out to market before a global recession hits. Usually, a spike in the BDI is a GOOD sign - but also correlates with a FALL in the price of gold. ANYTIME you see a spike in the BDI and a spike in gold - it means global players know a global recession is coming. This last happened in 2007-2008. Coincidently, the PMI began dipping in January of 2007 (and the first 2/10 yield inversion was late 2005). It then went totally negative in 2007.
A global recession will reach us. Deutsche Bank is on the brink of collapse. They have about $75 TRILLION in derivative exposures WORLDWIDE. This will make Lehman brothers look like the Continental Illinois National Bank and Trust Company failure of 1984. IOW - it's small potatoes compared to DB. DB will drag a lot of banks down with it. The question is WHEN. Personally - I think it will be timed for next spring (or late winter)...and Trump won't have a chance to fight off the recession that's coming. That's how I think they (the globalists) take him out. They collapse the system. That's why I am so against rate cuts now...it takes away all of our ammo to fight the monster when it appears. I think given CERTAIN conditions we COULD be a flight to safety in a world banking collapse - IF our banks were able to offer some % ROI. But - if we lower rates NOW - we won't be able to do that when they collapse the system to take him out. That's just my opinion - we will see if that is what happens or not.
>>>Call me crazy, but how do tariffs, which are designed to PROTECT American manufacturing jobs, cause a slow-down in manufacturing?
Most of the tariffs on Chinese goods were on intermediate goods. Who imports intermediate goods? US manufacturers.
For one thing, the tariffs aren’t on all foreign goods. As a result of the China tariffs US importers are sourcing from other low-cost countries like Vietnam.
At the same time, in retaliation China cuts back on imports from the US.
Result? Bigger trade deficit and lower manufacturing.
As someone mentioned, there’s also a global economic slowdown reducing demand.
A large percentage of manufacturers in the USA use parts or equipment manufactured in China to make finished goods here. It would be a miracle if the tariffs had no short-term negative effect.