More signs emerged in a wave of reports this week that global manufacturing is buckling from President Donald Trump’s trade war.
Purchasing manager indexes across Asia, along with revised numbers in Europe on Friday, showed new or persisting contractions in factory activity in April.
The reports capped a flurry of worrying signals: Few economies are avoiding the concussion of tariffs and paralyzing uncertainty that’s engulfed the world economy one month after the US president announced widespread taxes on American imports.
Releases earlier in the week revealed damage in the two main combatants, whose tariffs have effectively shut off incentives for trade between nations that account for more than 40% of global GDP. A report Thursday showed US manufacturing activity shrank by the most in five months, a day after data revealed Chinese factories slipped into the deepest contraction since December 2023.
Factory sentiment is unlikely to turn around until there is clarity on where tariffs are headed — which may take time, said James Knightley, chief international economist at ING.
“The on-off-on-off nature of the tariffs is creating huge uncertainty and that is leading to businesses sitting on their hands,” Knightley said. “They won’t make big decisions until they have some confidence that there won’t be another immediate change in the economic environment.”
Before this trickle of initial indicators of a downturn began to surface, alarm at the world’s prospects was already on show in Washington as finance chiefs gathered for the International Monetary Fund’s meetings last month. After a cut in the growth outlook, the lender’s chief, Kristalina Georgieva, warned that the chances of a global recession will rise if uncertainty persists.
Now, the evidence is crystallizing of a synchronized hit that the world economy may struggle to shake off — even if the rewiring of international commerce sought by the White House does succeed through bilateral deals that remove trade barriers and suspend the imposition of higher levies.
The Asian reports on Friday were stark. Indexes for the region’s factory giants, including South Korea and Taiwan, slipped sharply amid falling orders and production cutbacks, according to S&P Global. In Southeast Asia, activity shrank in Thailand, Malaysia and Indonesia.
Amid the overall gloom, India was an outlier with expansion in activity.
Another glimmer of optimism in the near term appeared in the euro area, where the S&P Global manufacturing index reached a 32-month high. But it remained in contraction territory, with only the prospect of a spending binge to rearm the region’s military likely to buoy the situation.
“Industrial activity remains highly exposed to US tariff policy,” Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said in a commentary. “Manufacturers were clearly able to expand their profit margins in April, as purchasing prices fell while selling prices rose at their fastest pace in two years.”
He added, though, that any improvements might be short-lived given the trade diversion that tariffs are causing. “This is unlikely to continue as US tariff policy is likely to see Chinese goods being offered more widely in the EU, intensifying competition,” de la Rubia said.
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Mohit Kumar, chief economist for Europe at Jefferies International, warned that the PMI numbers so far are just the start — and that the impact may linger despite any trade deals Trump concludes.
“It could be another few weeks before we really see the hit,” he said. “Data will weaken even if we get deals with the majority of partners at the end of the 90 days, because there has been a lot of uncertainty, people will have pulled back, supply chains have got broken.”
Figures out Friday showed the JPMorgan Global Manufacturing index of future output declined in April to the lowest level since October 2022.
Meanwhile, goods producers in emerging markets also took a hit.
In South Africa, manufacturers turned more gloomy, blaming uncertainty fanned by global tariffs and domestic political strains. Absa Group Ltd.’s PMI purchasing managers’ index, compiled by the Bureau for Economic Research, fell to 44.7 in April — its sixth consecutive month in the contraction zone.
Brazil’s manufacturing sector neared stagnation in April, with the PMI falling to 50.3, the weakest since December 2023.
“Business confidence regarding output prospects dropped to the lowest level in five years amid concerns about US tariff policy and domestic economic conditions,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., wrote in a report.
In Mexico, the decline was even more pronounced. Latin America’s second-largest economy saw its PMI plunge to 44.8 in April from 46.5 in March, marking its 10th consecutive month of contraction and the lowest reading since February 2021.
Gene Seroka, executive director with the Port of Los Angeles, said he sees weeks or months of disruptions for American retailers and factories alike, given the length of time it takes companies to reroute their supply chains to avoid the US’s 145% tariffs on most Chinese goods.
“Manufacturing floor space capacity is at a premium, and you don’t necessarily just say, ‘OK, shut off China today. I’m going to Cambodia tomorrow,’” Seroka said in an interview published Friday by Bloomberg Opinion. “It doesn’t work that way.”
--With assistance from Alexander Weber, Matthew Malinowski and Enda Curran.
