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The outgoing Biden administration is undermining a U.S. manufacturer in its high-stakes dispute with the Mexican government by “seeking to erode investor-state dispute settlement (ISDS) protections under U.S. trade agreements with Colombia, Mexico and Canada,” a recent Wall Street Journal (subscription) editorial revealed.

The problem: ISDS protections safeguard U.S. investments from foreign governments seeking to interfere with or appropriate them, as the predicament of Vulcan Materials Company shows.

• Vulcan has been embroiled in a dispute with the Mexican government since 2018, when the government shut down some of its quarrying operations, according to Chairman and CEO J. Thomas Hill.
• The unwarranted shutdown forced the company to pursue arbitration under NAFTA, but the situation only got worse—former Mexican President Andrés Manuel López Obrador ordered all of Vulcan’s operations to cease in May 2022, including at a deepwater port the company built in the early 1990s.
• Now, the company is expecting its second round of arbitration to be decided by mid-2025—unless the Biden administration guts the investor protections in the U.S.–Mexico–Canada Agreement, handing a victory (and a key port) to the Mexican government.

Congressional fury: Both Congress and Vulcan itself learned of the administration’s efforts via The Wall Street Journal editorial, instead of directly from the Office of the U.S. Trade Representative. This is particularly egregious because the USTR is required to consult with Congress on investment obligations in trade deals.

• Bipartisan members of Congress have expressed their outrage, with Sen. Katie Britt (R-AL) writing in The Wall Street Journal (subscription) that “the Biden administration is negotiating away the due process of Americans, including my constituents, in the waning days of this lame-duck administration.”
• On Dec. 20, three bipartisan senators joined Sen. Bill Hagerty (R-TN) in condemning the USTR’s efforts on the Senate floor. “If Mexico is allowed to target, without repercussion, a company like Vulcan, one that employs thousands of Americans, and has operated responsibly in Mexico for decades, that means no American business is safe in Mexico,” Sen. Hagerty said.
• Sens. Tim Kaine (D-VA) and Tommy Tuberville (R-AL) joined both Sens. Britt and Hagerty in calling on Congress to pass the Defending American Property Abroad Act, which would impose penalties on Western Hemisphere countries that unlawfully seize the assets of American firms.

The NAM says: The NAM is calling on the USTR to halt this effort immediately, said NAM Vice President of International Policy Andrea Durkin.

• “ISDS has a legitimate role in U.S. trade policy to ensure our manufacturers receive fair and equitable treatment by foreign governments and to protect against egregious expropriation or nationalization of U.S. investments without adequate and effective compensation.”
• “U.S. manufacturers are entitled—at a minimum—to be consulted about any proposed changes that would impact their right to due process in ongoing cases.”

The Biden administration’s ban on new offshore oil and gas drilling in most American coastal waters “sets a bad precedent for the country,” the NAM said Monday.

What’s going on: The decision, which comes just two weeks before President Trump takes office, applies to “new drilling off the entire East Coast, as well as California, Oregon and Washington state” and “some drilling off Alaska’s coast in portions of the Northern Bering Sea and in the eastern Gulf of Mexico” (The Hill).

• Though there is currently no active drilling in the Atlantic and most U.S. offshore oil and gas production comes from the central and western Gulf of Mexico, the area placed under the ban is the largest ever “formally taken off the table for drilling by a president.”
• In response, President Trump on Monday said he would “unban it immediately” (Associated Press).

Why it’s a problem: The moratorium could prove harder for Trump to undo than other 11th-hour moves by Biden. That’s in large part because of the Outer Continental Shelf Lands Act, which gives U.S. presidents the right to block drilling in certain areas but not the right to reinstate it.

• However, Congress could work with the new president to undo the move—and it should, Timmons said. “Manufacturers are committed to working with Congress and [President Trump] to scale back this harmful decision that undermines American energy dominance.”

Several last-minute regulatory actions by the outgoing Biden Treasury Department are “clear example[s] of regulatory overreach” that should be withdrawn immediately, the NAM told the Biden administration recently.

What’s going on: The Treasury Department has proposed new guidance and regulations that, if finalized, would change the IRS’s treatment of related-party transactions, particularly as they relate to partnerships.

• The proposed standards would impose significant reporting obligations on manufacturers while also drastically changing the tax treatment of these commonplace payments.
• Additionally, Treasury has proposed new rules governing “dual consolidated losses” that would make it more difficult for manufacturers operating in multiple jurisdictions around the world to utilize their tax losses appropriately.

Why it’s problematic: The proposed standards are outside Treasury’s statutory authority and are “unlikely to withstand inevitable judicial scrutiny,” the NAM told the agency at the end of 2024.

• In December, the NAM laid out the legal issues endemic to Treasury’s proposals, identifying both substantive and process-related issues that undermine each action.
• The submission builds on manufacturers’ comments to the agency on the proposals themselves: The NAM said in July that the related-party guidance was “wholly unauthorized, unsupported and unsupportable” and in August told the agency that the related-party rules “would impose an undue burden on taxpayers that outweighs any potential compliance benefit.”
• It added in October that the dual consolidated loss proposal was “internally inconsistent” and “fail[ed] to reflect reasoned decision-making.”

Regulatory onslaught: The NAM has been at the forefront of pushing back on the Biden administration’s regulatory onslaught, which costs manufacturers upward of $350 billion every year.

• Shortly after the 2024 presidential election, the NAM led a group of more than 100 manufacturing associations in urging the incoming Trump administration to “address burdensome regulations that are stifling investment, making us less competitive in the world, limiting innovation and threatening the very jobs we are all working to create right here in America.”

What’s next: The NAM is calling on the Biden Treasury Department not to finalize these proposals in the administration’s final days, but rather to pause or withdraw the rules in question until the Trump administration takes office.
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In October, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 3.6% annual gain, down from 3.9% in September. The 10-City Composite saw an annual increase of 4.8% in October, a decrease from 5.2% in September, while the 20-City Composite rose 4.2% year-over-year, down from 4.6%. Among the 20 cities, New York again posted the highest annual gain at 7.3%, followed by Chicago at 6.2% and Las Vegas at 5.9%. Tampa exhibited the lowest annual increase at 0.4%.

On a month-over-month basis, the U.S. National Index dropped 0.2% before seasonal adjustment but increased 0.3% after adjustment. The 20-City and 10-City Composites saw 0.2% and 0.1% decreases pre-adjustment, while both rose 0.3% post-adjustment.

The National Index is at a 17th consecutive all-time high, and only Tampa and Cleveland fell during the past month. Moreover, the National Index continued to improve following the election, indicating that less political uncertainty has led to an equity market rally.

In December, the global manufacturing sector fell back into contraction to 49.6 after activity had stabilized in November. Four of the five PMI components were at levels consistent with deterioration, as output and new orders registered declines after meager growth the month prior, and supplier delivery times lengthened. Manufacturing output declined modestly in December, and with marginal gains in October and November, production stagnated in Q4.

The shift from stabilization back to contraction is reflective of downturns in the U.S. and U.K., hitting 18- and 11-month records, respectively. On the other hand, Greece and Spain posted solid performances, contrasting the deep downturn in the rest of the Eurozone, France and Germany in particular. The fastest growth occurred in India and the Philippines compared to other surveyed countries.

Data broken down by sector exhibited lower output in the intermediate and investment goods industries. However, the consumer goods sector rose for the 17th consecutive month. In the same vein, new orders also increased for intermediate and investment goods, which was only partly offset by growth in new orders for consumer goods.

In December, manufacturing employment declined for the fifth consecutive month but at a slightly slower rate than the prior month. Job cuts were reported in the Eurozone and China, while the U.S. and Japan registered employment growth. Input inflationary pressures picked up to a four-month high, while output cost inflation eased to a nine-month low. As a result, confidence remained subdued, with optimism dropping to a three-month low.

In December, Texas factory activity increased, but industry indicators were mixed. The production index rose from -0.9 to 3.9 but was still far below the last positive reading of 14.6 in October. The new orders index increased from -11.9 to -0.9, indicating demand was relatively unchanged from November. Meanwhile, the capacity utilization and shipments indexes both rose slightly but remained in negative territory at -2.5 and -2.0, respectively.

Perceptions of manufacturing business conditions improved in December, with the general business activity index rising six points to 3.4, the first positive reading since April 2022. Meanwhile, the company outlook index continued to grow for the second consecutive month, improving to 8.0. The outlook uncertainty index, which has been volatile lately, fell for the second month in a row, from 5.9 to 1.2.

Labor market indicators suggested employment and workweeks steadied in December. The employment index fell 4.6 points to 0.3, while the hours worked index also decreased from 0.3 to -0.9. More than 16% of firms reported hiring, while nearly the same percentage noted layoffs. Moderate upward pressure on prices and wages seen in the past few months eased. The wages and benefits index fell slightly from 18.6 to 17.7. Meanwhile, the raw materials prices index dropped 18 points to 10.5, the lowest reading in 17 months. The finished goods prices index fell into the negative for the first time since 2023, decreasing more than 12 points to -3.4.

The outlook for future manufacturing activity remained optimistic, but the future production index fell from 44.0 to 32.7, with 44% of firms expecting increases in output in the next six months. Similarly, the future general business activity index remained positive but fell from 31.2 to 20.6.

In December, the U.S. manufacturing sector contracted for the ninth consecutive month, with the ISM Manufacturing^® PMI rising to 49.3% from 48.4% the prior month, indicating activity contracted at a slower pace. The New Orders Index continued in expansion territory, strengthening to 52.5%. In addition, production returned to expansion after six months of contraction, registering 50.3%. Meanwhile, inventories (48.4%), employment (45.3%) and backlog of orders (45.9%) remained in contraction. The Inventories Index, although still low, ticked up from its November reading of 48.1, suggesting a desire by companies being more willing to advance order deliveries to avoid potential tariffs.

The New Orders Index increased for the second consecutive month and rose 2.1 percentage points from November. While the index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022, respondents noted an improvement in demand, with two major sectors—computer and electronic products and food, beverage and tobacco products—reporting an increase in new orders.

The Production Index rose 3.5 percentage points in December to expansion after contracting in November. Despite expanding overall, only one of the six largest manufacturing sectors (computer and electronic products) reported increased production. Meanwhile, an expansion of new orders coupled with relatively stable production levels slowed the rate of declining backlog levels.

The Employment Index dropped 2.8 percentage points in December, contracting for the seventh consecutive month and at a faster pace. Of the six largest manufacturing sectors, none reported increased employment. Furthermore, companies continued to reduce headcounts through layoffs, attrition and hiring freezes.

The Prices Index rose 2.2 percentage points to 52.5%, indicating raw materials prices increased for the third straight month in December. Aluminum, basic chemicals, copper and natural gas registered increases, offset partly by steel, plastic resins and diesel fuel falling in price. Slightly more than 14% of companies reported paying higher prices, up barely from the percentage reported in November but down from nearly 20% in October.

Existing home sales increased 4.8% in November and jumped 6.1% from November 2023. Housing inventory declined to 1.33 million units, reflecting a 2.9% decrease from October but up 17.7% from last year. The median existing home price was $406,100, up 4.7% from last year, with all four U.S. regions reporting price increases.

Single-family home sales rose 5.0% from October, with the median price increasing 4.8% from November 2023 to $410,900. Condo and co-op sales grew 2.6% in November but declined 4.9% from the previous year, with the median price up 2.8% from the prior year to $359,800.

Homes were typically on the market for 32 days in November, up from 29 days in October and 25 days in November 2023. First-time buyers made up 30% of sales in November, up slightly from 27% in October but down from 31% in November 2023. All-cash sales accounted for 25% of transactions in November, down from 27% both in October and November 2023. Meanwhile, investors or second-home buyers represented 13% of homes purchased in November, down from 17% in October and 18% a year ago. Distressed sales, including foreclosures and short sales, represented 2% of purchases in November, unchanged from October and last year.

Building permits increased 6.1% in November but fell 0.2% over the year. Permits for single-family homes rose 0.1% in November but declined 2.7% over the year. Permits for buildings with five or more units grew 22.1% from October and 4.8% over the year.

In November, housing starts decreased 1.8% over the month and 14.6% over the year. Additionally, starts for single-family homes increased 6.4% from October but fell 10.2% from November 2023. Meanwhile, starts for buildings with five or more units plummeted 24.1% from October and 28.8% over the year.

Housing completions decreased 1.9% from October but jumped 9.2% from November 2023. Single-family home completions increased 3.3% from October and 7.0% over the year. Completions for buildings with five or more units dropped 11.1% over the month but rose 13.6% from November 2023.

Manufacturing activity fell slightly in the Tenth District in December, while expectations for future activity rose. 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 decline in activity was driven primarily by durable goods falling modestly, particularly wood, mineral and primary metal manufacturing, while nondurable goods activity was flat. Most month-over-month indexes were negative.

Both production and new orders fell slightly, while employment ticked up. The backlog of orders continued to decline to -22. The year-over-year composite index for factory activity ticked up slightly but was still negative. Capital expenditures, prices received and prices for raw materials all increased year-over-year while other indexes declined. The future composite index rose from 11 to 18, driven by high expectations for future production, shipments and new orders. Manufacturers also expected employment and capital expenditures to grow in the next six months.

This month, survey respondents were asked about worker productivity. More than half of firms (57%) reported that productivity has not changed in the past year, while 19% reported less productive workers and 15% reported more productivity. Firms were also asked about their reliance on immigrant workers. Nearly 70% said they were not reliant on immigrant workers, while 12% said they were slightly reliant, 13% were somewhat reliant and 6% were very reliant.