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The latest round of purchasing managers’ indexes (PMIs) and regional Federal Reserve surveys of economic activity are the first to include survey data following President Trump’s initial tariff announcements. While hard data remains stable, the sentiment and outlook portions of the surveys reflect a dire outlook for output and capital expenditures.
Regional Fed surveys, such as the New York Fed’s Empire State Manufacturing Survey, report modest declines in business activity for April, but business leaders were decidedly more pessimistic. Expectations for business conditions six months ahead plunged to their lowest point in five years for manufacturing, approaching pandemic lows for services. These surveys were mostly conducted in early April before Trump’s announcement of a 90-day pause in reciprocal tariffs, while the S&P PMI survey was conducted more recently and entirely after that announcement.
The S&P Global US PMI, measuring output of both the manufacturing and services sector, fell in April to its lowest level since July 2022, but remains in economic expansion territory. This survey reflects a more bullish picture, with the manufacturing survey indicating optimism from survey participants, based on the prospects for reshoring.
While surveys offer an inconsistent picture of business activity, price changes were more consistent, with most surveys rising. The cost push is most prevalent on the input side as companies pay more for goods and services. Consumers aren’t feeling the bite yet, as the increases have yet to pass through the supply chain. As a potential warning sign, companies’ expectations of future price increases have also risen.
Source: S&P Global PMI
Source: Bloomberg
As part of the ongoing trade confrontation, the Trump administration announced new U.S. port fees for Chinese-built ships. This action is part of an effort to revitalize the U.S. shipbuilding industry, and serves as a response to findings by the US Trade Representative that China has unfairly targeted maritime shipping. The tiered fees, set to begin on Oct. 14, 2025, will be imposed on Chinese built and owned ships at a rate of $50 per ton and on Chinese-built (not owned) ships at $18 per ton, with fees for each tier increasing annually by $30 and $5 respectively over the next three years.
The announced fees are lower than the $1.5 million per vessel initially proposed, potentially costing U.S. consumers an estimated $30 billion annually within the context of our $1.4 trillion dollar trade deficit. This action will also exempt vessels carrying exports and to ports in the Great Lakes, Caribbean Sea and American territories. The fees will add incremental import costs on top of tariffs, as Chinese-made vessels currently dominate global shipping.
The administration’s aggressive rhetoric relating to the Panama Canal has resulted in a rapidly changing dynamic for this major artery for global trade. Hong Kong-based CK Hutchison agreed to sell its ports at both ends of the canal to a consortium of U.S.-based firms including Blackrock. The Chinese government is attempting to stop the sale, but they are currently in violation of agreements, putting their assets at risk of seizure by the Panamanian government. As a result of negotiations with the Panamanian government, fees for U.S.-flagged ships were lowered, and American naval vessels are no longer subject to tolls.
The second significant crimp in the global supply chain, the Suez Canal, is now also open following military action by the U.S., with the Houthis agreeing to a ceasefire. Previously, the risks to ships moving through the Red Sea caused shippers to pay eye-watering insurance costs or take longer shipping routes around Africa. With the belligerence ceasing, traffic has already reached what was considered normal just two years ago, relieving pressure on global shipping.
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