Big manufacturing economies struggle as US tariffs hit order books

The world's big manufacturing economies struggled to fire up in October, business surveys showed on Monday, as weak U.S. demand and President Donald Trump's tariffs hit factory orders. Factories in the United States have also been battered by the import duties. New orders were depressed and supply chains strained last month, resulting in manufacturing activity contracting for an eighth straight month.

Some manufacturers complained that the "unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing or cost," adding that "challenges with tariffs on production equipment necessary for internal production makes it difficult to justify expansion of capacity."


Euro zone factory activity stagnated as new orders flatlined and headcount fell, its purchasing managers' index (PMI) showed, and its exporting powerhouse Germany showed little sign of recovery with production growth slowing again. German engineering orders plummeted in September, the VDMA engineering association said earlier on Monday. France's manufacturing sector remained weak, while Italy's contracted marginally. Spain stood out among the bloc's big four economies as its factories expanded at a faster pace than in September.

"The final release of the euro zone manufacturing PMIs confirmed the sector remains stagnant," said Paolo Grignani at Oxford Economics.

"Details indicate growth is mainly due to solid domestic demand, while new foreign orders continue to send warning signals, with reports of weak demand from France and the U.S." In Britain, outside the European Union, factories had their strongest month in a year, but the recovery was driven by a one-off bounce from the restart of production at carmaker Jaguar Land Rover after it was hit by a cyberattack.

While Trump's visit to Asia last week led to some progress in trade negotiations with the region's large manufacturing economies such as China and South Korea, exporters remain cautious about U.S. demand. Manufacturing activity in China grew at a slower pace last month while it fell in South Korea, with export orders in both countries declining, private-sector PMIs for October showed on Monday. Friday's official PMI survey showed China's factory activity fell for the seventh straight month, confirming suspicions that the earlier export rush to get ahead of U.S. tariffs had well and truly ended.

"The PMIs suggest that China's economy lost some momentum in October, with slower growth across manufacturing and construction," said Zichun Huang, China economist at Capital Economics. "Some of this weakness may reverse in the near term, but any boost to exports from the latest U.S.-China trade 'deal' is likely to be modest and wider headwinds to growth will persist."

CAUTIOUS OPTIMISM ON TARIFFS PROGRESS In a meeting in South Korea last week, Trump and Chinese President Xi Jinping agreed to de-escalate tensions, including through a one-year delay in reciprocal tariffs, but the agreement does little to address a deeper divide between the world's two economic superpowers.

Policymakers in Beijing are looking to see whether China's $19 trillion economy is on track to hit its official 2025 growth target of around 5% without needing to reach for further stimulus. Trade data for September showed China's exports rising faster than expected, although this was mostly due to growth in new markets as U.S.-bound shipments tumbled 27% year-on-year. Similarly, Seoul's trade deal with Trump announced last week secured lower U.S. tariffs on Korean goods, but was seen at best as a compromise that prevents Asia's fourth-largest economy from falling behind in global trade. In stark contrast to its northeast Asian peers, India's factory activity sped up, driven by brisk domestic demand that helped offset the hit to exports.

Elsewhere in Asia, continued manufacturing declines were seen in Malaysia and Taiwan, while Vietnam and Indonesia saw growth in their manufacturing sectors pick up.