Input Stories

The U.S. stock market saw its worst day yesterday since the early days of the pandemic, following President Trump’s latest round of tariffs. These tariffs, when combined with other U.S. tariffs in 2025, make the U.S. average effective tariff rate 22.5%—the highest rate since 1909, according to The Budget Lab at Yale.

Manufacturers already had record-high concerns about trade uncertainties before this latest announcement, as the NAM’s Q1 Manufacturers’ Outlook Survey found.  Now, the uncertainty and instability have only increased, reminding observers the last time the U.S. imposed sweeping tariffs—with disastrous consequences.

Back then: The Tariff Act of 1930, also known as the Smoot-Hawley Act, was signed into law by President Herbert Hoover. Originally intended to protect the U.S. agricultural industry, it was later expanded to cover a broad swath of the U.S. economy, as CNBC recounts.

• The Smoot-Hawley Act imposed tariffs on approximately 25% of all imports to the U.S., according to Santa Clara University economic historian Kris James Mitchener.
• Some sounded the alarm at the time. Before signing the law in June 1930, President Hoover received “a petition signed by more than 1,000 economists asking him to veto the bill.”

A spiral: “Smoot-Hawley raised the average tariff on dutiable imports to 47% from 40%, [Dartmouth economist Doug] Irwin said. Depression-era price deflation ultimately helped push that average to almost 60% in 1932, he added.”

• Compare that to now: the latest tariff rates will be higher than the Smoot-Hawley levels, as reported by CNBC .

Manufacturers hurt: Following the passage of Smoot-Hawley, Argentina, Australia, Canada, Cuba, France, Italy, Mexico, Spain and Switzerland all responded with retaliatory tariffs on U.S. goods.  These tariffs often fell on manufactured products, weakening the sector amid the economic catastrophe of the Depression.

• For example, France, Spain, Italy and Switzerland increased tariffs on American cars, effectively closing off those markets to major American exports.
• In all, “U.S. exports to retaliating nations fell by about 28% to 32%, said Mitchener. Further, nations that protested Smoot-Hawley also reduced their U.S. imports by 15% to 23%.”

Long-lasting pain: The Dow Jones Industrial Average slid following the imposition of the tariffs, bottoming out in July 1932.

History lesson: Smoot-Hawley has long been condemned by American leaders of both parties as a mistake that severely damaged the American economy.

• Before taking office, Roosevelt denounced the Smoot-Hawley Act, saying it “compelled the world to build tariff fences so high that world trade is decreasing to vanishing point.” He would sign the Reciprocal Trade Agreements Act, which reduced tariffs with trading partners on a reciprocal basis, in 1934.
• When President Ronald Reagan spoke to the NAM’s Annual Meeting in 1986, he said, “I well remember the antitrade frenzy in the late twenties that produced the Smoot-Hawley tariffs, greasing the skids for our descent into the Great Depression and the most destructive war this world has ever seen. That’s one episode of history I’m determined we will never repeat.”

Modern realities:  President Trump has insisted that “we’re bringing wealth back to America” through these sweeping tariffs (CNBC). But manufacturers are urging caution, especially when future tax policy is so uncertain.

• One family-owned U.S. textile manufacturer, founded in 1887, warns that tariffs will dramatically raise the prices of its components, such as fabric, thread, yarn and fiber—none of which it can source in the U.S. “Tariffs would force us to curtail employment or close facilities if our customers would not accept higher prices,” the company said.
• Another manufacturer, an employee-owned firm, makes products and systems that control, monitor and protect utility and industrial electric power systems—which is critical for the coming buildout of new power generators and the electrical grid to meet the demand for AI datacenters. Tariffs will materially harm its ability to enable this essential economic growth.
• A third manufacturing company, a 100-year-old Wisconsin company specializing in custom-designed thermal solutions and large-scale HVAC cooling systems used in agriculture, mining, oil and gas and more, says that “tariffs on Canada and Mexico could cause us to take cost-cutting measures, including workforce reductions.”
• Last, a manufacturer that has made chemicals in the U.S. since the late 1800s reports that tariffs may set back its plans for expansion in North America, “which is already five times more expensive for us than in Asia and three times more expensive than in Europe.” The company will be less able to support crucial semiconductor manufacturing, and may even have to close low-margin business lines in the U.S.

The last word: “[M]anufacturers are scrambling to determine the exact implications for their operations [of the April 2 tariffs],” NAM President and CEO Jay Timmons said on Wednesday. “The stakes for manufacturers could not be higher. Many manufacturers in the United States already operate with thin margins. The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower.”

Across the country, manufacturers are telling their stories of shop floor operations under U.S. tariffs, the first of which went into effect March 13. The consensus: tariffs have made things harder all around

• Jeremy Rosenbeck is president of Cincinnati, Ohio–area manufacturer Republic Wire, Inc., which makes copper wire products for the construction industry. In anticipation of tariffs, Rosenbeck “over the winter [ordered] an extra two months’ worth of copper rod (worth tens of millions) to give him enough tariff-free raw material for his business if a new trade agreement isn’t quickly worked out” (Cincinnati Enquirer).
• Republic Wire has nearly 200 employees and each year does approximately $500 million in sales. About 10% of that is outside the U.S.
• Rosenbeck, who says he “understand[s] what they’re trying to do with the tariffs,” nonetheless told the Enquirer that spring is a bad time for uncertainty in the construction sector, as it’s when builders make their plans for the rest of the year. “Higher prices on materials could mean fewer construction projects, which could mean a slowdown for the industry, fewer jobs and a drag on the economy as a whole,” the outlet notes.

Where the burden falls: Chuck Dardas, president and chief operating officer of 67-year-old Michigan automotive manufacturing firm AlphaUSA, wrote in a recent op-ed for The Detroit News that while the Trump administration says tariffs will rebalance the scales, “the truth is that the burden falls squarely on American manufacturers and, ultimately, the American consumer.”

• For AlphaUSA, that’s because “as an S Corporation, our net income flows directly to our tax returns,” Dardas wrote. “If tariffs wipe out our income, it’s akin to a 100% income tax. There’s no profit, no reinvestment and no sustainability. This isn’t just a theoretical concern—it’s a very real possibility. If our paycheck goes to zero, how do we pay our bills? How do we reinvest in our business? How do we survive?”
• The sticker prices of vehicles are too high already, “and these tariffs will only push them higher. Inflationary pressures are mounting, and the Federal Reserve’s decision to hold off on rate changes underscores the precariousness of the situation.”
• Opposition to the tariffs, Dardas continued, “is not about politics. It’s about facts.” Manufacturers that rely on foreign imports cannot simply make the change to domestic sourcing with the flip of a switch. “[E]ven if we could pivot back to American manufacturers for … particular components, that’s not saying that they’re going to be less expensive” domestically, he said this week on radio show “All Talk with Kevin Dietz .” “They could be even more than the tariffs we could very well be faced with still buying the parts from Canada.”

“An existential threat”: If the tariffs remain in place long term, small manufacturers might not be able to hold out long enough to see their promised benefit, either, Dardas told the BBC’s “World Business Report” late last month.

• “If these go on for a long period of time, it’s an existential threat to companies our size,” he said. “We’re not that big, and there [are] a lot of us [smaller manufacturers] out here as well.”

In January, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 4.1% annual gain, up from 4.0% in December. The 10-City Composite saw an annual increase of 5.3% in January, up from 5.2% the previous month, while the 20-City Composite rose 4.7% year-over-year, up from 4.5%. Among the 20 cities, New York again posted the highest annual gain at 7.7%, followed by Chicago at 7.5% and Boston at 6.6%. Tampa again exhibited the lowest annual return, with prices falling 1.5%.

On a month-over-month basis, both the U.S. National Index and 20-City Composite improved 0.1% before seasonal adjustment, and the 10-City Composite rose 0.2% pre-adjustment. Meanwhile, the 10-City and the 20-City Composites increased 0.5% after adjustment, while the U.S. National Index improved 0.6%. In 2024, the U.S. National Index advanced 4.1%, with the bulk of appreciation occurring in the first six months. Prices fell 0.7% in the second half of 2024 due to high mortgage rates and constraints on affordability. Of the cities tracked by the 20-City Composite Index, only four (New York, Chicago, Phoenix and Boston) showed price increases in the second half of the year, revealing broad cooling to prices.

Buyers and sellers are exercising more caution as affordability reaches multidecade lows in many regions, led by elevated monthly payment burdens amid already high home prices. Inventory also continues to be a challenge, especially in legacy metro areas where limited new construction constricts supply.

Consumer sentiment fell for a third month in a row in March, declining nearly 12% from February to an index reading of 57.0. The expectations index also plunged nearly 18% to 52.6. Sentiment declined across all demographic and political groups, with all groups expressing anxiety over their personal finances, business conditions, unemployment and inflation. Two-thirds of consumers anticipate unemployment will rise in the next year, the highest reading since 2009. This is notable because in recent years, strong labor markets and incomes have been the primary reason for continued durability in consumer spending.

Year-ahead inflation expectations surged for a third consecutive month in March from 4.3% to 5.0%, the highest reading since November 2022 and well above the pre-pandemic range of 2.3–3.0%. Long-run inflation expectations also soared from 3.5% to 4.1%, led by a notable rise in concerns from independents and some Republicans. Overall, aggregate sentiment has been led by independents’ views, and thus not swung by polarization across the two major parties.

The S&P Global Flash U.S. Manufacturing PMI fell slightly from 52.7 in February to 49.8 in March, dropping below the 50-point marker that signals deterioration in business conditions. Factory production declined for the first time since October 2024, with companies noting fewer instances of front-running production due to tariff fears. Slowing of new orders after two months of solid gains further depressed the Manufacturing PMI. Meanwhile, supplier delivery times shortened, indicating slightly less busy supply chains.

Overall business sentiment picked up in March, led by improvements in the service sector that offset declines in manufacturing. Optimism about future business conditions fell to the lowest point since October 2022, with companies citing weakening consumer demand and the impact of policies from the new administration. Input prices jumped in the manufacturing sector, likely due to tariff policies, but competition has limited companies’ ability to pass along costs and raise selling prices.

Manufacturing activity in the Fifth District slowed in March. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The composite manufacturing index returned to -4 from 6 in February, led by a significant drop in the shipments index. Manufacturers are also less optimistic looking ahead, with the outlook for future local business conditions falling from 2 in February to -22 in March.

Among its components, shipments decreased from 12 to -7, which led the overall drop in the composite index. New orders fell from 0 to -4. Employment declined from 9 to -1, indicating hiring dropped in March. The vendor lead time index increased from 2 to 12 in March, while the share of firms reporting backlogs grew from -6 to -1. Companies felt more pessimistic about local business conditions, with the index falling from -5 to -13. The average growth rates of prices paid increased, and the growth rate of prices received also rose, but at a slower rate. Firms still expect both price indexes to increase in the next 12 months, with a significant uptick in input prices.

Expectations for future shipments and new orders both declined but remained in positive territory, suggesting that firms still anticipate improvement in these areas over the next six months but not as much as previously expected. Expectations for backlogs fell, moving from 3 to -6. Meanwhile, firms exhibited a more cautious approach to equipment and software spending, with expectations slipping from 0 to -8. Similarly, expectations for spending on capital expenditures fell from 2 to -2. In sum, businesses in the Fifth District are growing more hesitant about the prospects for future growth.

Manufacturing activity fell modestly in the Tenth District in March, with the month-over-month composite index decreasing to -2. Meanwhile, expectations for future activity cooled but remained positive. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The month-over-month decrease in activity was due primarily to declines in nondurable manufacturing. Most month-over-month indexes were negative, while improved from last month. Production was relatively flat, and the employee workweek, inventories for materials, prices received and input prices were positive. On the other hand, inventories for finished goods turned negative, declining 10 points from February.

Production rose 14 points to 1, while new orders slipped from -7 to -12. Employment increased in March, rising from -14 to -4, as did the average employee workweek, turning positive from -9 to 6. The backlog of orders remained negative but improved slightly from -12 to -6. The year-over-year composite index for factory activity edged up from -18 to -7. Prices received slipped from 17 to 15 month to month but remained the same year-over-year. Prices for raw materials increased from 38 to 42 in March and from 52 to 67 from a year ago.

In March, survey respondents were asked about their firms’ profit margins and strategy changes. Nearly half of firms reported decreased profit margins in the past 12 months, while 30% reported increased margins. In the next 12 months, 33% of firms anticipate growing margins, and 40% predict reductions. Amid continued uncertainty, 66% of firms say they are considering changes in strategy, management, sourcing of materials or pricing to adapt to economic conditions this year. Additionally, selected written comments highlight how businesses are still waiting for the full impact of tariffs to hit their operations, particularly increased input costs.

Consumer confidence declined 7.2 points in March to 92.9. The Consumer Confidence Index fell for the fourth consecutive month and slipped below the expected range that has prevailed since 2022. The Present Situation Index and the Expectations Index also decreased.

The Present Situation Index, reflecting current business and labor market conditions, fell 3.6 points to 134.5. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, dropped 9.6 points to 65.2, the lowest level in 12 years and below the recession signal threshold of 80.

Of all components, only consumers’ assessments of current labor conditions improved, and only slightly, with 33.6% of consumers saying jobs were “plentiful,” in March. On the other hand, consumers’ outlook for future business conditions turned negative. Views of the current business market situation softened close to neutral, with 17.7% of consumers saying conditions were “good,” while 16.6% said conditions were “bad.” Consumers’ pessimism about future labor market and business conditions worsened to a 12-year low. Consumers’ optimism about future income also dropped after months of strong performance, as fears about the economy and labor market begin to impact personal financial expectations. March’s drop in confidence was strongest for consumers over 55 years old, and, to a lesser extent, those between 35 and 55 years old. The decline was also broadly experienced across income groups, with the exception of those making more than $125,000.

As inflation pressures have heated up in recent months, inflation expectations likewise ticked up from 5.8% in February to 6.2% in March. Meanwhile, expectations for higher interest rates rose, with more than half of consumers (54.6%) expecting higher rates in the next 12 months. Meanwhile, consumers’ views of their current financial situation strengthened slightly from February, while future expectations dropped to the lowest level since July 2022. Expectations for a recession in the next 12 months held steady at a nine-month high, while buying plans for homes and cars declined. Perhaps due to potential higher prices from tariffs, intentions to purchase big-ticket items improved. Mentions of trade and tariffs in written responses continue to dominate, with more references than normal to economic and political uncertainty.

Building permits fell 1.2% in February and 6.8% over the year. Permits for single-family homes in February slipped 0.2% from January and declined 3.4% over the year. Meanwhile, permits for buildings with five or more units fell 4.3% from January and 15.7% over the year.

In February, housing starts surged 11.2% from January but fell 2.9% from February 2024. Similarly, starts for single-family homes soared 11.4% from January but declined 2.3% from February 2024. Meanwhile, starts for buildings with five or more units improved 12.1% from January but fell 6.6% over the year.

Meanwhile, housing completions decreased 4.0% over the month and 6.2% over the year. On the other hand, single-family home completions grew 7.1% from January but slipped 1.0% from February 2024. Completions for buildings with five or more units plummeted 20.7% over the month and 15.8% from one year ago.

Existing home sales increased 4.2% in February, but fell 1.2% from February 2024. Housing inventory grew to 1.24 million units, reflecting a 5.1% rise from January and a 17% jump from last year. The median existing home price was $398,400, up 3.8% from last year, with all four U.S. regions reporting price increases.

Single-family home sales fell 5.7% in February, with the median price increasing 3.7% from February 2024 to $402,500. Condo and co-op sales plummeted 9.8% to 370,000 units in February and were also down 9.8% from last year. Meanwhile, the median price rose 3.5% from the prior year to $355,100.

Homes were typically on the market for 42 days in February, up from 41 days in January and 38 days in February 2024. First-time buyers made up 31% of sales in February, up slightly from 28% in January and 26% in February 2024. All-cash sales accounted for 32% of transactions in February, up from 29% in January but down from 33% in February 2024. Meanwhile, investors or second-home buyers represented 16% of homes purchased in February, down from 17% in January and 21% in February 2024. Distressed sales, including foreclosures and short sales, represented 3% of purchases in February, unchanged from January and the previous year.