Several industries have been adversely affected by the mounting trade tensions between the United States and China. None more so than the global manufacturing sectors as new reports have revealed.
According to the latest data, global manufacturing was at its weakest last month with low figures not seen since 2012. This has been seen as a clear sign that the global economy is now slowly weakening.
HIS Markit's global Purchasing Managers Index fell by as much as 49.8 points in May, indicating a slowdown in countries such as Japan, UK, Germany, and the United States. The figure places the index well below the level that divides expansion from contraction.
China's PMI also dropped by 49.4 points and its employment index was dragged along with it. The country's Caixin manufacturing PMI was holding at 50.2, but that could change as the trade war escalates. In the US, the main purchasing manager index fell to its lowest level since October 2016.
The slowdown can be directly blamed on the imposing threat looming on the sector as the United States and China continue their tit-for-tat trade actions. This has also caused new warnings from Wall Street, which has now escalated its predictions for a possible recession.
Apart from its trade war with China, the United States has extended its fight to other countries as well. President Donald Trump recently announced that the US may be imposing a similar tariff hike to Mexico. This added to the already escalating concerns amongst investors, who are now flocking to safe-haven assets and running away from stock and equities.
The political and economic climate has continued to suffer amidst the growing uncertainty revolving around the United States' actions. China recently published a white paper that squarely blamed the United States for being the one that broke down the trade negotiations and for seeking "unreasonable" demands.
China had also stated that it would not be forced to a deal just because the US is placing extreme economic pressure on it. China is apparently ready to fight the US in its own terms, which has been apparent in the implementation of its own tariff hikes on US goods.
Investment firms such as Morgan Stanley have warned investors not to underestimate the situation as a further escalation of the trade war could push global economies into recession. The firm believes that global recession could occur within nine months if Trump continues to impose tariffs and if a deal is not ironed out between the United States and China.
