The Dow Jones Industrial Average, which had
been up early in the day, was down about 300
points in mid-afternoon trading.
Trump’s nearly 15-month trade war with
China and his tariffs on steel, aluminum
and other products were intended to help
U.S. manufacturers. But his confrontational
trade policies have so far had the opposite
effect and helped spur the Federal Reserve to
cut interest rates in September for a second
time this year.
Weakening business confidence and softening
global demand have hit American factories
hard, prompting pullbacks in production
and employment. This month’s ISM measure
reported the lowest level of manufacturing
activity since June 2009, the last month of the
Great Recession.
Manufacturing makes up only about a tenth of
the U.S. economy, but analysts see the survey
as a warning sign about the trade conflict.
Because the latest round of Trump tariffs on
Chinese imports affects many consumer goods,
economists say weakening business sentiment
could spill over to slow consumer spending,
which supports the bulk of the U.S. economy.
Fotios Raptis, a senior economist at TD
Economics, suggested that the U.S. economy
could be headed for a downturn if the ISM
manufacturing index dropped even lower. And
given factory declines overseas as well, the
global economy is also at rising risk.
“The U.S. economy is at the precipice of
an economy-wide contraction in output,”
Raptis said.