What is the continuous contraction of the American manufacturing industry like?

Recently, data released by the Institute for Supply Management (ISM) showed that the Purchasing Managers' Index (PMI) for the US manufacturing industry fell to 48%, marking the sixth consecutive month that the index has been below the boom bust line (50%). As the world's largest economy, the sustained contraction of the US manufacturing industry is not only related to its domestic economic recovery process, but also has a profound impact on the global industrial chain pattern. From the policy environment of high interest rates to the pains of supply chain restructuring, from the inherent contradictions of industrial structure to the uncertainty of external trade environment, the "synergy" formed by multiple factors is dragging the US manufacturing industry into a growth dilemma.

The 'tightening inertia' of monetary policy is a direct cause of suppressing the vitality of the manufacturing industry. Since 2024, although the Federal Reserve has slowed down its pace of interest rate hikes, it has consistently maintained the federal funds rate in the high range of 4.25% -4.5%, and has not adjusted interest rates for four consecutive months as of June 2025. This policy choice stems from the Federal Reserve's concerns about inflation - it predicts that the core personal consumption expenditure (PCE) inflation rate will still reach 3.1% in 2025, far above its long-term target of 2%. The high interest rate environment directly drives up the financing costs of manufacturing enterprises, especially for capital intensive industries such as automobiles and machinery manufacturing. Taking a car parts manufacturer in Michigan as an example, its loan interest expenses for the first quarter of 2025 increased by 23% year-on-year, forcing it to postpone its expansion plan for a new production line.

The "hollowing out" of the industrial structure has fundamentally weakened the manufacturing industry's ability to resist risks. For a long time, the US manufacturing industry has shown an imbalanced pattern of "high-end industry spillover and low-end industry loss". From employment data, from 2000 to 2025, employment in the US clothing manufacturing and textile industries decreased by 84% and 71% respectively, while the furniture industry decreased by 51%. Even in technology intensive computer and electronics manufacturing industries, employment decreased by 44%. Although capital intensive industries such as chemicals and petroleum processing have relatively stable employment (with a decline of only 8%), these industries are more sensitive to macroeconomic cycles, and global energy price fluctuations in 2025 have led to a year-on-year decrease of 6 percentage points in the operating rate of US refining companies. What is even more alarming is the problem of "innovation disconnect" in the US manufacturing industry - the capital market excessively pursues high-tech giants such as Meta and Apple (the total market value of the "seven giants" reached $13.1 trillion in 2024, which is 50 times the total market value of all gold stocks), leading to long-term investment losses in traditional industries such as mining and manufacturing. In 2025, investment in key mineral industries in the United States will drop to its lowest point since 1990. Even with government subsidies, private capital remains cautious about manufacturing projects with long return cycles and high risks. This "capital mismatch" further exacerbates the imbalance of industrial structure.

The 'uncertainty shock' of the external trade environment has added the last straw to the contraction of the manufacturing industry. In August 2025, the United States announced the revocation of export exemptions for chip equipment from Samsung and SK Hynix factories in China, requiring them to apply for licenses for future imports of American technology. This policy not only sparked strong opposition from South Korean companies, but also led to turbulence in the global semiconductor supply chain - domestic chip design company Nvidia's Chinese customer orders decreased by 30% year-on-year, while American automotive electronics manufacturers that rely on South Korean chips face the risk of component shortages. At the same time, the export competitiveness of the US manufacturing industry continues to decline. Data from May 2025 shows that civilian aircraft, oil, and precious metals account for over 15% of its exported goods, while high value-added machinery and electronic products account for less than 10% of its exports; The export market is overly dependent on Mexico (15.64%) and Canada (15.21%), with insufficient penetration into emerging markets, making it difficult to hedge the demand pressure brought about by the slowdown of the European and American economies.

The manufacturing industry is the cornerstone of the real economy, and its vitality is not only related to employment and growth, but also determines a country's industrial competitiveness and economic security. The current predicament of the US manufacturing industry is not only the result of short-term policy adjustments lagging behind, but also the inevitable result of long-term industrial structural imbalances. To get out of the quagmire of contraction, the United States needs to abandon the short-sighted thinking of "decoupling and breaking chains", better balance inflation and growth in monetary policy, focus on "resilience building" of the supply chain in industrial policy rather than "closed exclusivity", and return to the multilateral cooperation framework in trade policy. Only in this way can we inject sustained growth momentum into the manufacturing industry and avoid falling into a vicious cycle of "contraction recession".