U.S. manufacturing contracted for the ninth month in a row in November, hit hard by falling orders and rising raw material costs. Import tariffs remain one of the biggest obstacles for factories nationwide, according to the latest report from the Institute for Supply Management (ISM).
Layoffs and Shifts in Production Linked to Tariffs
Tariff Pressures Trigger Workforce Cuts
The ISM survey revealed that some transportation equipment manufacturers have begun reducing staff due to the ongoing tariff environment. They reported making “more permanent changes,” including layoffs, updated shareholder guidance, and shifting production offshore—processes that previously would have been based in the U.S. for export.
In May, former President Donald Trump imposed 25% tariffs on over $460 billion worth of imported vehicles and auto parts. Although some tariff relief has been issued, new duties—such as a 25% tariff on imported medium- and heavy-duty trucks and parts—took effect on November 1.
Economists say this uncertain tariff landscape is weighing heavily on the sector.
Factory Activity Falls as Orders Decline
PMI Signals Ongoing Contraction
The ISM manufacturing PMI slipped to 48.2 in November, down from 48.7 in October. A reading below 50 indicates contraction. Manufacturing makes up roughly 10% of the U.S. economy, and analysts expect production to remain sluggish, despite some sectors noting mild improvements after the government shutdown ended.
While some industries benefited from increased AI-related investment, most continue to struggle. The Federal Reserve’s Beige Book noted that tariffs remain a significant headwind, even in areas showing small gains.
Only four industries reported growth—such as computers, electronics, and machinery. Others, including wood products, textiles, and transportation equipment, contracted sharply.
Tariffs Add Costs, Confusion, and Supply Chain Delays
Uncertainty Hurts Forecasting and Consumer Demand
Chemical product manufacturers reported weakened demand due to tariff-driven cost increases and economic uncertainty. Makers of electrical appliances, components, and wood products also complained about “trade confusion” and incorrect export documentation.
Some manufacturers blamed inaccurate AI-generated information for confusing consumer behavior and making demand forecasting more difficult.
Adding to the turmoil, the U.S. Supreme Court recently questioned the legality of Trump’s tariffs—raising fears that a ruling overturning them could spark further disruption.
Economists Warn of Structural Challenges
“The Manufacturing Sector Is Sick”
Trump has defended tariffs as necessary to protect American manufacturing. But many economists believe the industry faces deeper structural issues, including long-term labor shortages.
Carl Weinberg of High Frequency Economics stated plainly:
“The manufacturing sector is sick.”
New orders dropped to 47.4, contracting in nine of the last ten months. Higher prices caused by tariffs have made goods more expensive, softening both domestic and overseas demand.
Supply Chains Move Faster, but Costs Keep Rising
Input Prices Increase Despite Weak Demand
With weakened demand, supply chain pressures eased, although some manufacturers reported longer shipping times and extended lead times due to reductions in raw material suppliers.
The ISM supplier deliveries index fell to 49.3, signaling faster deliveries.
Still, despite cooling orders, manufacturers paid more for inputs in November. The prices-paid index rose to 58.5, suggesting inflation may remain above the Federal Reserve’s 2% target.
Economists caution this could keep goods inflation elevated into early next year before easing.
Employment Continues to Decline
10 Consecutive Months of Job Losses
Manufacturing employment contracted for the tenth month in a row. ISM reported that 67% of businesses are managing or reducing headcount, rather than hiring.
Economists warn this is a troubling sign for blue-collar workers already facing a difficult job market.