The Liberal Gun Club Forum

After two boom years the picture has changed for America’s factories. Battered by rising uncertainty and the damper it has put on capital expenditures, slowing export markets, a stronger dollar, and higher input costs due to tariffs, U.S. manufacturers are making less than they did a year ago.

A widely watched index of manufacturing activity compiled by the Institute for Supply Management showed a contraction in August—the first since 2016. The Sept. 3 data release sent U.S. stock prices and bond yields tumbling as it confirmed a worrying trend that became visible over the summer, when Federal Reserve data showed factory output falling for a second consecutive quarter. The surge in industrial jobs seen in the first two years of the Trump presidency has also gone into reverse in some parts of the country. Nationally, the U.S. has added 44,000 manufacturing jobs so far this year, according to data released on Friday. But that’s way down from the 170,000 added in the same period last year.

In 22 states—including electorally important ones like Wisconsin and Pennsylvania—the number of people working in factories actually fell in the first seven months of this year, according to figures compiled by the Economic Innovation Group, a think tank.

The attack on trade and globalization that Trump launched in 2016 always had a political calculus, and this helped him win a narrow victory in industrial swing states like Wisconsin. But as Trump bids for a second term there are signs he may have shot his own manufacturing recovery in the foot and undermined his own best argument—a strong economy—for reelection.

Trump bristles at the idea, portraying his trade war against China as a necessary fight against a rising economic rival. “To me, this is much more important than the economy,” Trump told reporters on Sept. 4. “Somebody had to do this.”

The inescapable irony is that Trump’s trade wars have helped create a scenario similar to one that helped get him elected in 2016. As a candidate, Trump benefited from the grinding and uneven recovery from the last recession. He also got a boost from a manufacturing slowdown that struck the Rust Belt just as he hit the stump promising a new era of protectionism.

The last time the U.S. logged two consecutive contractions in quarterly industrial production before this year was the first half of 2016. The country lost almost 30,000 manufacturing jobs that year as a collapse in oil prices hit the energy sector and filtered through manufacturing. Industrial regions such as western Pennsylvania saw a slowdown in shale oil projects and in sectors supplying them, such as steel. Yet none of those 2016 quarters saw as large a slump as the 3.1% fall in output recorded in the second quarter of this year.