President Donald Trump’s stop-start tariff policy continues its grip over the manufacturing sector, with confidence expected to slip further this month. Economists anticipate the Institute for Supply Management’s upcoming report will show the Purchasing Managers’ Index dropping to 48 from 49 for April, signaling a deeper contraction. Manufacturers have been scrambling to insulate operations from trade uncertainty, and this latest report will offer a fresh look at how well they’ve held up under pressure. Here are five key things to watch:
1. New export orders are likely to fall further
New orders—a leading indicator of future factory activity—have continued to sag, acting as a drag on the PMI. Businesses remain hesitant to place new orders amid tariff-related uncertainty, particularly after President Trump unveiled a sweeping round of new tariffs in early April, targeting $18 billion worth of Chinese imports, including electric vehicles, steel, and critical minerals. Even with the 90-day pause on most new tariffs, the uncertainty around sourcing and input costs has forced many firms to delay or cancel planned purchases.
2. Rising raw material prices give ISM a misleading boost, but not for long
Raw material prices have surged to their highest levels since the pandemic, giving the PMI an artificial boost. While rising prices usually signal strong demand, this increase is more likely the result of manufacturers stockpiling goods ahead of tariffs and racing to secure alternate suppliers. Some economists expect those price pressures to ease soon as businesses pause new purchases and begin tapping into their inventories.
3. Tariff impacts may soon reflect in employment figures
The labor effects of tariffs may just be starting to surface. While the manufacturing workforce continues to shrink, the decline has been gradual—driven more by attrition than layoffs, as companies quietly scale back hiring and trim their employment numbers. A sharp drop in container volumes from China suggests that production slowdowns are already underway. Data indicates that bookings for China-to-U.S. shipping containers plummeted by 45% year-over-year, marking three consecutive weeks of declining demand.
If weekly jobless claims start ticking up, it could mark the first clear sign that trade tensions are eroding the labor market.
4. Supply chain shifts may provide temporary relief
To soften the blow from tariffs, many U.S. manufacturers are reworking their supply chains—moving operations closer to home or spreading sourcing across countries like Mexico, Canada, and Vietnam. Nearshoring has helped avoid some immediate disruptions, but it’s far from seamless. For instance, U.S. imports from Mexico surged over 5% in early 2025, while Chinese imports dropped more than 20% year-over-year, reflecting a clear pivot.
Still, these changes take time to fully implement. With shipping delays just starting to surface and new vendor relationships still forming, the ISM report may begin to show slower supply deliveries.
5. Sentiment slips ahead of output—but trouble may be brewing
While manufacturing output and vehicle sales have remained surprisingly steady, business sentiment is turning increasingly sour. The ISM’s forward-looking indicators, like new orders and expectations indexes, have been falling—suggesting that manufacturers are bracing for tougher months ahead. The University of Michigan’s Business Expectations Index dropped to 61.2 in April, its lowest level since June 2023, reflecting growing concerns about inflation and trade uncertainty among business leaders.