US manufacturing and the ongoing trade war

According to the Institute for Supply Management, manufacturing gauge rose to 60.2 in June, which was 1.5 higher than May and beat the economists’ estimate of 58.5. Such data are showing the US manufacturing were expanding in June. The Trump administration has launched a worldwide trade, not only with China, which they assume is the biggest threat of the US, and also with its allies, such as the European Union, Canada and Mexico. All these countries have publicly announced they will fight back and fight hard on the US tariffs imposed on their exports. Such world trading environment should be hostile to the US businesses; therefore, such expansion in June was a surprise. However, some data seems a bit more surprising and could imply a possible decline in the manufacturing sector. New orders registered a slight decline, showing the expansion could slow down in the next period possibly. In addition, the trade war was not actively ongoing during the entire period of June, so it is reasonable to believe that the impact of the trade war has not been fully reflected in the June manufacturing sector report. Moreover, the costs of importing raw materials are highly likely to rise, this would also slow down the expansion of the manufacturing sector, this impact was not fully reflected by the June manufacturing report.

Therefore, though the June manufacturing sector report is very encouraging, the future of the US manufacturing sector might not be as optimistic as economists expect.