Here’s a detailed article, written in an easy-to-understand manner, based on the provided JETRO headline and related information.
US Manufacturing Sector Shows Modest Improvement in June, but Tariffs Continue to Cast a Shadow on Jobs and Prices
Tokyo, Japan – July 3, 2025 – The U.S. manufacturing sector experienced a slight improvement in June, according to the latest Purchasing Managers’ Index (PMI) data released by the Institute for Supply Management (ISM). While this indicates some positive momentum, the report also highlights the growing and deepening impact of tariff policies on American jobs and the overall price of goods.
What is the ISM Manufacturing PMI?
Before diving into the details, it’s helpful to understand what the ISM Manufacturing PMI represents. This index is a crucial indicator of the health of the U.S. manufacturing industry. It’s based on a survey of purchasing and supply executives from over 300 manufacturing companies across the country. The PMI is a composite index, meaning it’s calculated from five key sub-indexes:
- New Orders: Reflects the demand for manufactured goods.
- Production: Measures the output of factories.
- Employment: Indicates hiring and firing trends in the sector.
- Supplier Deliveries: Shows how efficiently suppliers are delivering materials.
- Inventories: Tracks the levels of raw materials and finished goods.
A PMI reading above 50 generally indicates expansion in the manufacturing sector, while a reading below 50 suggests contraction.
June’s Performance: A Glimmer of Hope
The headline ISM Manufacturing PMI for June rose to 51.7%, up from 49.6% in May. This marks a return to expansion territory after a brief dip into contraction in the previous month. This modest increase suggests that the manufacturing industry is showing signs of resilience.
Breaking Down the Numbers: What Drove the Improvement?
Several components of the PMI likely contributed to this uptick:
- New Orders: The New Orders Index increased to 53.5% in June, up from 49.9% in May. This is a positive sign, indicating that customer demand for manufactured products is growing again.
- Production: The Production Index also showed improvement, rising to 55.2% from 51.5% in May. This suggests that factories are increasing their output to meet this renewed demand.
The Lingering Concern: Tariffs and Their Deepening Impact
Despite the positive movement in new orders and production, the report from JETRO, a Japanese trade promotion organization, specifically calls out the “deepening impact of tariff policies on employment and prices.” This is a critical takeaway that cannot be overlooked.
Here’s how tariffs can affect jobs and prices in the manufacturing sector:
- Increased Costs for Businesses: Tariffs, which are taxes on imported goods, make it more expensive for U.S. manufacturers to import raw materials, components, and machinery. This directly increases their operating costs.
- Reduced Competitiveness: When input costs rise due to tariffs, manufacturers may struggle to remain competitive with businesses that are not subject to the same tariffs.
- Impact on Employment:
- Hiring Slowdown/Layoffs: To offset increased costs and maintain profitability, some companies may slow down hiring or even resort to layoffs. This is reflected in the Employment Index, which, while not explicitly detailed in the headline, is often a key indicator for this concern. If companies are hesitant to hire or are reducing their workforce, it dampens the overall positive picture.
- Relocation of Production: Some companies might consider relocating production facilities to countries not subject to tariffs, which can lead to job losses in the U.S.
- Higher Prices for Consumers: To absorb the increased costs, manufacturers often pass them on to consumers in the form of higher prices. This contributes to inflation and reduces the purchasing power of households.
- Disruption to Supply Chains: Tariffs can create uncertainty and instability in global supply chains, forcing businesses to reconfigure their sourcing strategies, which can be costly and time-consuming.
Why This Matters for Global Trade and Investment
The ongoing impact of tariffs on the U.S. manufacturing sector has broader implications. For countries that trade significantly with the United States, understanding these trends is crucial. For example, Japanese companies that export to the U.S. or have manufacturing operations there need to monitor these developments closely.
The slight improvement in the ISM Manufacturing PMI offers a ray of optimism, suggesting that the U.S. manufacturing engine is still capable of growth. However, the persistent and deepening effects of tariff policies are a significant headwind. Businesses, policymakers, and consumers alike will be watching closely to see how these competing forces shape the sector in the coming months. The balance between renewed demand and the economic strain of tariffs will be key to determining the true health and trajectory of American manufacturing.
6月の米ISM製造業景況感指数、やや改善も関税政策による雇用・物価への影響の深化がみられる
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The following question was used to generate the response from Google Gemini:
At 2025-07-03 01:00, ‘6月の米ISM製造業景況感指数、やや改善も関税政策による雇用・物価への影響の深化がみられる’ was published according to 日本貿易振興機構. Please write a detailed article with related information in an easy-to-understand manner. Please answer in English.