U.S. Manufacturing Contraction Deepens Amid Tariff Fallout

U.S. manufacturing activity has now contracted for six consecutive months, with August 2025 marking the latest downturn. The sector struggles under the weight of Trump-era import tariffs, which manufacturers say have created an environment reminiscent of the Great Recession. The tariffs, defended as necessary to revive industrial production, have instead pushed the average tariff rate to its highest level in a century.

Factory construction spending fell 6.7% year-over-year in July, compounding the decline. A recent U.S. appeals court ruling that deemed most tariffs illegal has further unsettled businesses. "The manufacturing sector remains in a holding pattern until tariff uncertainty subsides," said Stephen Stanley of Santander U.S. Capital Markets.

Hardest-hit industries include paper products, machinery, electrical equipment, and computer components—sectors already grappling with supply chain disruptions. The policy's unintended consequences now threaten to overshadow its original protectionist intent.