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Daily Mail
20 hours ago
- Business
- Daily Mail
Panic in Trump heartland as tariffs choke investment
President Donald Trump's tariff policies are posing a threat to the revival of US manufacturing. A push for a 'Made in America' renaissance has been a key priority for the White House, with particular focus on the American Rust Belt. But companies are warning how turmoil and confusion around Trump's trade wars is slowing the progress made in reinvigorating American factories. The latest jobs report revealed that manufacturing jobs declined by 8,000 last month - the most this year so far. Anxiety is high in the Midwest, which remains home to the largest concentration of US manufacturing jobs — despite losing tens of thousands of workers to offshoring in the early 2000s. 'Overall, it is going to be a drag on the US economy,' Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, told Bloomberg. 'In particular, it's going to be a drag on the Midwestern economy.' US factory activity also contracted in May for the third month in a row. The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010, Bloomberg reported. This was due to companies looking to cheaper production and labor outside the US - in China in particular. In recent years, a cautious optimism had returned, as supply chain shocks from the pandemic pushed some companies to bring production back to the US. But frequent changes and uncertainty around where Trump's tariff policy is headed has 'got people spooked,' Andrew Anagnost, CEO of Autodesk, told the outlet. The company sells software used by manufacturers to design factories and improve processes. 'The current operating mode is just the death to long-term investment,' he said. While construction projects that were already underway are still going ahead, he added, confusion about the future is stalling new work. Some states are harder hit than others by tariff plans. Illinois, for example, will see a 16 percent increase in effective tariff rate on manufacturing inputs, according to the National Association of Manufacturers. This means that the total cost of importing goods used in production increases, which could lead to reduced profits, supply chain shocks or higher prices for consumers. Minnesota will also see a 16 percent increase, while Missouri is facing a 15 percent hike. The sense of uneasiness is particularly strong in the automotive industry, which is facing 50 percent tariffs on steel imports, a measure Trump announced at an appearance at Irvin Works, a steel plant outside the Pittsburgh city limits in West Mifflin, last month. Kenosha, Wisconsin-based company Snap-on provides tools used by car mechanics. Its CEO told Bloomberg that while the company can manage the impact of tariffs as it mostly serves US customers with domestically-made products, auto shop workers are 'confidence poor.' Nicholas Pinchuk said customers are worried about economic disruption even if they are fans of the President. 'They're still big Trump fans. This is Trump territory. They believe in where we're going, but they're worried that something's going to happen,' he said. Even companies that stand to benefit from tariffs are expressing anxiety about what the future might hold. Ross Widmoyer, CEO of textile manufacturing company Faribuault Mill, told the outlet he has been getting calls from retailers looking for a producer in the US. But he is still concerned that the trade wars could impact economic growth. 'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' Widmoyer, who is also chairman of the Minnesota Manufacturers' Council, said. The Trump administration has pointed to announcements from major companies of planned investment in the US as proof the policies are working. For example, Volkswagen's CEO confirmed last month that the company is looking to make a 'massive' US investment. Oliver Blume, VW's top boss, said he has been in contact with members of the Trump administration, including US Commerce Secretary Howard Lutnick. His strategy to shield VW from steep tariff costs appears two-fold: maintain open communication with US officials and continue ramping up investment in American businesses.
Yahoo
25-05-2025
- Business
- Yahoo
The US Economy Just Shrank for the First Time in 3 Years: What That Means for Your Wallet
The Q1 2025 GDP results are in, and the results were not exactly encouraging. While in a typical quarter the U.S. GDP grows by 2% to 4%, in Q1 2025, the economy actually shrank. Considering that two consecutive quarters of negative GDP growth typically constitute a recession — and the fact that many economists have been predicting a recession in 2025 — investors are unsurprisingly on edge. Consider This: Find Out: But what exactly does a shrinking GDP mean for the economy and your wallet? And was this reading the start of a trend or simply a one-off reading? Read on to learn all the details. The economy shrank by 0.3% in the first quarter of 2025, marking the first contraction since Q1 2022. This was a stark contrast to the 2.4% rate of growth in Q4 2024. Although economists were expecting a negative reading, estimates were for a drop of 0.2%, slightly better than the negative 0.3% that was reported. Be Aware: It's often said that economists can't identify a recession until it has already passed. If the Q1 2025 GDP reading is the first of two in a row, which would meet the traditional definition of a recession, it would mean that the country is likely already in a recession. The economic slowdown that defines a recession can hit your wallet in various ways. Recessions usually result in layoffs and job losses, so your income may be at risk. Debt levels tend to rise during a recession, and this would be a likely consequence if you lose your job and don't have an adequate emergency fund. Investment values also tend to fall during a recession, meaning your retirement account or other investments may take a hit. The drop in first-quarter GDP and the potential for the economy to fall into a recession fit neatly into the narrative that the Trump administration's tariffs were destined to drag down the economy. But that may not necessarily be the case. According to Gus Faucher, chief economist at PNC Financial Services Group, trade did play a role in the first-quarter GDP drop, but perhaps not in the way that you might imagine. As Faucher sees it, 'We saw companies bringing in a lot of imports to try to get ahead of tariffs. We saw a huge build in inventories.' This imbalance in imports — which were essentially 'pulled ahead' into Q1 to avoid getting hit with tariffs — was the primary driver behind the drop in GDP. Highly-regarded financial publication Barron's notes that the 41% surge in Q1 imports 'is likely to be a one-time event.' Meanwhile, the primary drivers of the economy, inflation-adjusted final sales to domestic purchasers and consumer spending, actually rose in the quarter, by 3% and 1.8%, respectively. While the Q1 decline in GDP may prove to be an anomaly, this doesn't mean that there is no risk of the economy continuing its decline and falling into a full-blown recession. Barron's notes that Trump's tariffs are a moving target, making it hard for companies to conduct business as usual amidst all the uncertainty. Additionally, Chinese imports have already plummeted, something that could cause severe economic ripples in the coming months. There is certainly a very possible scenario in which the economy continues to contract as the trade war continues. While a recession is not guaranteed, and certain data points suggest the economy remains strong, it's never a bad idea to review your financial position and see if you are prepared to weather an economic contraction. An emergency fund that can cover three to six months of your living expenses is a good start. Paying down debt, living within your means and doing your best to prove your value at work are all additional ways to help defend against the effects of a recession. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates 8 Common Mistakes Retirees Make With Their Social Security Checks This article originally appeared on The US Economy Just Shrank for the First Time in 3 Years: What That Means for Your Wallet Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
