Concerns about upcoming U.S. tariffs are creating a cloudy outlook for factories in Asia and Europe. Surveys released on Tuesday show that while many manufacturers are feeling the pressure, some regions are managing to thrive. Notably, Japan’s manufacturing sector reported its first growth in 13 months, while South Korea’s contraction showed signs of easing.
Additionally, China’s Caixin PMI index indicated expansion, even as an official survey suggested ongoing activity shrinkage. In Europe, countries like Ireland, Spain, and the Netherlands are standing out as strong performers, despite the euro zone remaining largely stagnant and the UK continuing to experience decline, albeit at a slower pace. Analysts emphasize that the underlying softness in manufacturing reflects significant challenges for businesses and policymakers amid U.S. President Donald Trump’s restructuring of global trade through imposing tariffs.
Economist Wang Zhe noted the complexities of navigating the current external environment. The Caixin/S&P Global survey revealed that China’s manufacturing PMI rose to 50.4, surpassing expectations, while Japan’s final au Jibun Bank PMI reached 50.1, supported by increased output, although demand remained weak due to tariff concerns. Meanwhile, South Korea’s manufacturing activity contracted for the fifth consecutive month, even as the pace of decline eased with recent political stability following a presidential election.
In India, manufacturing activity surged to a 14-month high, driven by a significant rise in international sales and record hiring. As the deadline for negotiations with U.S. trading partners approaches on July 9, countries such as China, Japan, and South Korea are striving for concessions on critical exports, with the EU set to engage in talks in Washington later this week. The euro zone’s manufacturing PMI edged up slightly but remained below the growth threshold of 50.
National surveys revealed stark contrasts, with Ireland achieving a peak of 53.7 and other nations like Germany facing manufacturing contractions despite improvements. Overall, while there are signs of recovery, the situation remains precarious, with potential risks looming for demand, supply chain stability, and growth outlooks. The European Central Bank President Christine Lagarde echoed these concerns, highlighting a fundamentally changed global environment since pandemic-related inflation.