The shadow of tariffs did not dissipate, and the US manufacturing industry contracted again in December, and PMI hit a new low of more than a year

The Zhitong Finance App learned that on Monday, the contraction of the US manufacturing industry in December 2025 exceeded market expectations, and the sluggish trend has continued for 10 consecutive months. As new orders fall again and investment costs continue to rise, the manufacturing industry is still deeply affected by President Trump's import tariff policy. According to the data, tariffs have boosted the prices of some commodities, curtailed the recovery in demand, and worsened the already pressured manufacturing industry.

The American Institute for Supply Management (ISM) announced on Monday that the US manufacturing purchasing managers' index (PMI) fell to 47.9 in December 2025, down from 48.2 in November, a new low since October 2024, and also significantly below the 48.4 expectations given by economists in media surveys. A PMI below 50 means that manufacturing is in a contraction range, and the industry accounts for about 10.1% of the total US economy.

Despite the continued contraction of the manufacturing industry, ISM notes that the PMI is still above 42.3, a level consistent with overall economic expansion over the long term. At the macro level, the US economy grew at an annualized rate of 4.3% in the third quarter above the trend level. Although a record government shutdown is expected to drag down economic activity in the fourth quarter, most economists still expect the US economy to accelerate again in 2026 as the effects of tax cuts are released and investment in artificial intelligence continues to heat up.

However, with the exception of a few areas boosted by the AI boom, the Trump administration's large-scale imposition of import tariffs has clearly suppressed the manufacturing industry. Although Trump sees tariffs as a necessary means to revive America's manufacturing base, which has been in recession for a long time, economists generally believe that due to structural problems such as labor shortages, it is difficult for the manufacturing industry to return to its previous size.

The legal dispute surrounding tariff policy is expected to reach a critical juncture in early 2026. The US Supreme Court will rule on the legal premise on which Trump levied tariffs. According to estimates by the Yale University Budget Laboratory, the relevant policies have pushed the average tariff level on US imports from less than 3% before Trump returned to the White House in January this year to close to 17%. The Supreme Court already questioned this practice during a relevant hearing in November last year. As a result, the market speculated that if the ruling was unfavorable to Trump, the tariff policy might be overturned and forced to switch to other trade methods, thus bringing new uncertainty.

Looking at specific sub-indicators, the forward-looking new orders index in the ISM survey was basically flat at 47.7 in December, slightly higher than 47.4 in November, but it has been declining for the fourth month in a row, and has been in a contraction range for 10 months out of the past 11 months. Analysts believe that tariffs push up commodity prices and are an important reason why demand continues to be suppressed.

Meanwhile, manufacturing investment costs are still high, which is an important factor for inflation to continue to rise above the Federal Reserve's 2% target. In December, the ISM price payment index remained at 58.5, higher than market expectations of 57.0, indicating that the cost pressure has not abated significantly.

Manufacturing employment continues to weaken against the backdrop of weak demand. Factory employment indicators measured by ISM have been declining for 11 consecutive months, marking the longest period of recruitment slump in about five years. According to official data, the number of people employed in the US manufacturing industry according to the US Bureau of Labor Statistics fell to the lowest level since March 2022 in November, further highlighting the challenges facing the recovery of the manufacturing industry.