Trade War Causing US Manufacturing into Recession

The trade war between US and China has been ongoing since 2018.  While it seems China is feeling the brunt of the tariffs, it is the US manufacturing industry that has really taken an impact.  For the second quarter in a row, production for US manufacturing has declined, on average of 2%.  Despite the economic recovery the US has been experiencing over the last decade, the tariffs set in place by China are accounting for the dip in production. 

Fears surrounding the trade war and an increase in tariffs are not far off.  It doesn’t look like the US and China will be able to come to terms and call off the trade war.  Trade talks have restarted between the two counties and analysts are hopeful that an end is in sight.  Unfortunately, the President isn’t confident they’ll be able to reach a deal anytime soon. 

In my previous blog about the US-China trade war, I mentioned several tariffs that were in place.  Items such as steel and aluminum are major factors for the US.  Companies have the tough decision to make.  Do they look for other options from other countries, a lengthy and expensive process?  Or do they keep status quo only to find the tariffs have gone up again and their profit margins diminish?  Unfortunately, many have chosen to do nothing, causing a slowing of hiring and investments.  This signaled a slowdown in consumer spending, even though retail sales have been rising consistently.  June retail sales rose to 0.4%, about double the anticipated gain. 

China’s economy slowed this quarter, a significant amount of 6.2%, the lowest in nearly three decades.  Perhaps this and the recession the US is feeling with its manufacturers, the US and China are able to come to an agreement.