Tags

, , , , , , , , , , , ,

Tariff fear-mongers must have felt a shiver of excitement when today’s new industrial production report came out from the Federal Reserve. For the results showed the inflation-adjusted manufacturing output shrank in January by 0.90 percent – the third sequential decline since the first Trump administration metals tariffs went into effect, and the second since the first round of its China tariffs went into effect. Surely these figures made clear that their claims of the levies hurting American manufacturing were finally coming true! Even better, from their standpoint, revisions were slightly negative.

What a shame to report then that an examination of those always crucial internals demonstrates beyond a reasonable doubt that the trade curbs have had nothing to do with any trouble industry may (or may not) be running into. The evidence? The continuing excellent results registered by metals-using industries, and mixed figures for the much smaller number of sectors where the impact of the first China tariffs (whose first full month was only last August) can reliably be measured.

Here are the changes in real production for the major metals-using industries starting with April – the first full month during which these sectors had to deal with the levies. The table shows the previously reported data for December, the new December data, and the January figures. (All these statistics, it should be noted, are still preliminary.) And they would challenge even the cleverest D.C.-based spin-meister to construct a narrative supporting the popular Twitter hashtag #TariffsHurt:

                                                         old thru Dec.      new thru Dec.       thru Jan.

overall manufacturing:                   +2.02 percent      +2.11 percent   +1.20 percent

durables manufacturing:                +3.31 percent      +3.45 percent   +1.65 percent

fabricated metals products:            +2.05 percent      +2.82 percent   +3.19 percent

machinery:                                     +4.93 percent      +4.38 percent   +3.87 percent

automotive:                                    +3.36 percent      +3.93 percent    -5.18 percent

major appliances:                           +0.08 percent      +3.13 percent    -2.87 percent

aircraft and parts:                           +6.80 percent      +6.14 percent   +6.35 percent

As has been the case almost consistently since the trade curbs on steel and aluminum went into effect, most of the industries relying especially heavily on these metals have actually out-performed the rest of manufacturing. And the struggles indicated here of sectors like automotive and major appliances sure spring from developments distinctive to those sectors – in automotive, major recent volatility (which has also led to major recent revisions) and in appliances, a separate set of levies on large household laundry machines that went into effect in February. The above figures, moreover, even point to volatility in appliance production.

It’s more difficult to gauge the impact of the China tariffs because the first (relatively minor) tranche has been in effect for a much shorter period, and because the levies were based on a system for classifying manufacturing that’s different from the system used in the Fed’s industrial production reports (as well as most major federal government data). So matching up industries is a daunting task, and the more I think about it, the more I’m convinced that even the short list of sectors I presented last month for the December industrial production report contained too many industries where the match-up simply wasn’t close enough to be useful.

Below, therefore, are the only the sectors for which I think it’s possible to draw any firm conclusions, along with the total manufacturing results as a control figure. This highly limited sample shows the latest after-inflation growth rates from August (again, the first full months the first China tariffs were in effect) through December, and through January. And the only consistent trend visible here is volatility.

                                                                       Aug.-Dec.                    Aug.-Jan.

overall manufacturing:                              +1.26 percent              +0.36 percent

ball bearings:                                             +0.02 percent               -0.09 percent

industrial heating equipment:                    +5.19 percent              -3.86 percent

farm machinery and equipment:                +2.50 percent              +9.12 percent

As the next few months pass, it will be possible to examine usefully the China tariffs’ impact on more and more manufacturing sectors. To date, however, the grade is “incomplete” (at best). As for the effects of the steel tariffs, though, isn’t it time to consider putting that #TariffsHurt hashtag way out to pasture?