Troubling Signs As Both Stocks And Manufacturing Drop During Donald Trump Trade War

US President Donald Trump attends the first working session of the G7 Summit on August 25, 2019 in Biarritz, France.
Jeff J Mitchell / Getty Images

Signs of a weakening economy continue to develop as stocks took a dive on Tuesday morning. Additionally, for the first time since Donald Trump took office, manufacturing activity has declined.

According to The Institute for Supply Management (ISM), the manufacturing activity index dropped from 51.2 to 49.1, reports CNBC. This is the first decline since 2016, prior to when Trump stepped into the Oval Office. At the same time, the stock market has continued to tumble, with the Dow dropping 300 points in trading on Tuesday, according to CNN. The Nasdaq Composite was down nearly one percent.

The drop in the market is likely driven by several elements, including the weaker-than-expected manufacturing report and Trump’s continued trade war with China.

On Sunday, the U.S. imposed a tariff on $110 billion in Chinese goods. The 15 percent tariff was met with five and 10 percent tariffs in retaliation from China, with a focus on the agricultural sector. Trump previously announced that a portion of the U.S. tariff on Chinese goods would be delayed in order to not disrupt consumer spending over the holidays, but he made good on his promise to impose new tariffs at the start of the month.

The manufacturing sector, which has been seen as a strong element under the Trump administration, has taken a hit as the trade war drags on, and indicators show that American consumers are concerned about the impact of the tariffs on the price of goods within the country.

Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, commented on the growing uncertainty.

“Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders,” he said. “Many respondents continued to note global trade softness as a reason for sluggish activity.”

Chris Williamson, the chief business economist at IHS Markit, also weighed in on the economic indicators, which show that demand and consumption both contracted in August.

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“The August PMI indicates that US manufacturers are enduring a torrid summer,” he said. “Output and order book indices are both among the lowest seen for a decade, indicating that manufacturing is likely to have again acted as a significant drag on the economy in the third quarter, dampening GDP growth.”

While Trump’s trade war appears to have had mixed results, the president has said that he will double down on the battle if he is elected to a second term while commenting on the weak stock market.