MW Trump tariff talk is raising inflation and could weaken the economy, ISM finds: 'Customers are pausing on new orders'

By Jeffry Bartash

A measure of prices jumps to a 33-month high

The specter of rising U.S. inflation reared its head in February as the cost of supplies for U.S. manufacturers jumped to a more than 21/2-year high in response to new or threatened tariffs by President Donald Trump.

The closely followed manufacturing index of the Institute for Supply Management stayed in positive territory in February - though just barely - for the second month in a row, at 50.3%. It fell slightly from the January reading.

Any number above 50% signals expansion.

Yet an index that measures the cost of supplies rose to a 33-month high of 62.4% in February, from 54.9% in the first month of the year. The last time businesses faced such a big inflation threat was in the middle of 2022.

"That's obviously the story of this report," said Timothy Fiore, chair of the ISM survey. No other single issue, he said, has ever gotten as much attention in any one month of the ISM report

'Customers are pausing on new orders as a result of uncertainty regarding tariffs.'Transportation company senior executive

New orders, a sign of future demand, also sank back into contractionary territory.

Before Trump announced the tariffs in February, the ISM manufacturing survey had climbed to a 27-month high following his election, with companies optimistic about deregulation and lower taxes.

Yet the president's tariff talk has created a fresh round of uncertainty as businesses try to plan for them.

Higher tariffs could raise the cost of supplies or reduce U.S. exports if other countries retaliate. The price of steel, for example, has already risen since Trump increased tariffs.

Key details:

-- The index of new orders dropped to 48.6% from 55.1%.

-- The production barometer slid 1.8 points to 50.7%.

-- The employment gauge declined 2.7 points to 47.6%.

Big picture: Manufacturers and other U.S. companies are waiting to see how Trump's tariff proposals pan out - and that could be holding the economy back. There's already some evidence the economy has slowed in early 2025 as businesses and households weigh how to proceed.

Looking ahead: "Customers are pausing on new orders as a result of uncertainty regarding tariffs," an executive at a transportation company told ISM. "There is no clear direction from the administration on how they will be implemented, so it's harder to project how they will affect business."

Market reaction: The Dow Jones Industrial Average DJIA and the S&P 500 SPX fell in Monday trading after the ISM report.

-Jeffry Bartash

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March 03, 2025 10:51 ET (15:51 GMT)

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