U.S. manufacturing activity remained in decline in November 2025, marking the ninth straight month of contraction. Factories nationwide struggled with falling orders and rising input prices, largely driven by the ongoing impact of President Trump’s extensive import tariffs. The sector’s challenges underscore persistent uncertainty in trade policy and a fragile economic outlook, pressuring employment and production costs.

Tariff Pressures Deepen Manufacturing Challenges

According to the Institute for Supply Management (ISM), the manufacturing Purchasing Managers’ Index (PMI) slipped to 48.2 in November, down from 48.7 in October, where readings below 50 indicate contraction. Some transportation equipment manufacturers cited layoffs linked directly to Trump’s tariff regime, which imposes 25% duties on over $460 billion of annual imports, including vehicles and auto parts. Since May, limited tariff relief has been granted for certain countries and components, yet new 25% tariffs on medium- and heavy-duty trucks and parts took effect on November 1, intensifying pressures.

Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, stressed that the sector “continues to be weighed down by the unpredictable tariffs landscape.” The tariffs have increased production costs, as reflected in the ISM prices-paid index climbing to 58.5 from 58.0 the previous month, signaling sustained inflationary pressures. While computer and electronic products alongside machinery showed modest expansion, industries such as wood products, transportation equipment, textiles, and chemicals contracted sharply.

Manufacturers also reported trade confusion exacerbated by artificial intelligence tools generating inaccurate forecasting data. For example, some producers of adhesives and sealants highlighted weakening demand amid tariff-related uncertainty, especially affecting building construction sectors. Additionally, logistical issues have caused varied supplier lead times, with some industries noting faster deliveries and others experiencing delays due to consolidation of raw material suppliers.

Employment, Orders, and Fed Policy Outlook

The ISM employment sub-index declined again, marking the tenth month of shrinking manufacturing jobs. Susan Spence, chair of the ISM’s Manufacturing Business Survey Committee, observed that 67% of surveyed companies continue to prioritize managing headcount reductions rather than hiring, painting a grim picture for blue-collar workers.

The forward-looking new orders index worsened, dropping to 47.4 from 49.4 in October, contracting in nine of the last ten months. Higher prices, driven primarily by tariffs, have reduced demand for factory goods, though unfilled orders and exports showed slight improvements. Supply chain pressures eased somewhat, as faster supplier deliveries suggest diminished bottlenecks, but some sectors, such as fabricated metal products, reported longer lead times due to strategic supplier cuts.

The Federal Reserve’s Beige Book acknowledged modest manufacturing gains in some districts, yet reaffirmed tariffs and their resulting uncertainty remain headwinds. Oren Klachkin, financial market economist at Nationwide, highlighted that inflation may stay above the Fed’s 2% target through early 2026 before easing once tariff effects normalize. Upcoming Federal Open Market Committee meetings reveal division among policymakers, with some opposing further rate cuts amid uneven economic momentum.

Manufacturing: Market Outlook

November data confirm the manufacturing sector’s ongoing contraction amid persistent tariff-induced cost pressures and subdued demand. With employment declining for the tenth month and orders continuing to contract, headwinds remain substantial as 2026 approaches. Despite isolated growth in AI-related technologies and sectors, the broader manufacturing landscape faces sustained challenges tied to trade policy uncertainty and rising input costs. Market participants and policymakers will closely monitor forthcoming economic indicators and Fed actions for signs of stabilization in manufacturing activity.