Global Manufacturing Faces September Slump Amidst Trade Tensions

In September 2025, the global manufacturing sector experienced a significant contraction, with key economies reporting declines in factory activity. This downturn is primarily attributed to weakened demand from major markets like China and the United States, coupled with the ongoing impact of U.S. tariffs under President Donald Trump.

The latest Purchasing Managers' Index (PMI) data reveals a troubling trend across major economies:

• Eurozone: Manufacturing activity slipped back into contraction, with the PMI falling to 49.8 from 50.7 in August. This decline was driven by significant decreases in new orders and employment, particularly in Germany, France, and Italy. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted, "The drop in the PMI is showing up across the board, with respective figures for consumer goods, capital goods and intermediate goods all down on the month." (source)

• Japan: Factory activity declined at its fastest pace in six months, with the PMI dropping to 48.5 from 49.7 in August. The downturn is attributed to weak demand from key markets like China and the impact of U.S. tariffs. (source)

• South Korea: In contrast, factory activity expanded for the first time in eight months, with the PMI rising to 50.7 from 48.3 in August, supported by increased overseas demand. (source)

• India: Manufacturing growth slowed to a four-month low, with the PMI dropping to 57.7 from 59.3 in August. This slowdown was accompanied by a significant rise in input costs, leading to the fastest increase in factory gate prices in nearly 12 years. (source)

The global manufacturing sector has been grappling with fluctuating demand and evolving trade policies. The recent contraction underscores the sector's vulnerability to these factors.

Since January 20, 2025, the U.S. has increased tariffs on imports from various countries, citing authorities such as the International Emergency Economic Powers Act (IEEPA) and Section 232 of the Trade Expansion Act of 1962. These tariffs have targeted a range of goods, including steel, aluminum, automobiles, and specific products from countries like China, Canada, and Mexico. (source)

Affected countries have imposed retaliatory tariffs on U.S. goods, escalating trade tensions and disrupting global trade dynamics. For instance, China imposed retaliatory tariffs on U.S. goods, escalating trade tensions. These trade disputes have contributed to the decline in manufacturing activity, as businesses face increased costs and supply chain uncertainties.

The contraction in manufacturing has several implications:

• Employment: Reduced manufacturing activity often leads to job losses, affecting workers and their families.

• Consumer Prices: Increased production costs due to tariffs can result in higher prices for consumers.

• Global Trade Relations: Ongoing trade disputes may strain diplomatic relations and hinder international cooperation.

The global manufacturing contraction in September 2025 highlights the interconnectedness of international trade and economic policies. As countries navigate these challenges, strategic responses will be crucial to mitigate adverse effects and promote economic stability.