Recession-spooked US manufacturers are begging the Fed to cut interest rates
US manufacturers are ringing the alarm bells for a coming recession, and are begging the Federal Reserve to do something about it.
A manufacturing survey from the Federal Reserve Bank of Dallas this week showed that participants across various industries are fretting about the Trump tariff uncertainty and its impact on their businesses.
“We have seen a 25% drop in incoming RFQs [request for quotations] in April compared with the average of previous months,” one manufacturer in the computer and electronic industry said. “Assuming this continues, we expect to see roughly a 10-15 percent decline in sales in May.”
Another manufacturer said the back-and-forth in tariff headlines and increasing uncertainty mean it’s near-impossible to plan “anything accurately” in the next six months, let alone the next six weeks.
“If this continues for any length of time, many small companies are likely to be significantly hurt or even gone,” one manufacturer said, adding that the risk to businesses is “far greater and less understood” than the COVID shutdown in 2020.
An appeal to Trump and the Fed
Most of the businesses surveyed want the tariff uncertainty to end as soon as possible, with one manufacturer advocating for the Trump administration to use “a scalpel rather than a sledgehammer” to craft trade policy.
The weakness hitting manufacturers has spured direct appeals to Trump and the Fed.
“President Trump, tariffs and maximum business uncertainty [are issues affecting our business],” a manufacturer said. “[We see a] probable recession soon.”
Meanwhile, manufacturers’ message to the Fed is clear: lower interest rates now.
“Please lower interest rates,” one manufacturer said. “We need it in order to boost the economy due to the uncertainty and tariffs.”
A manufacturer in the transportation equipment industry said “interest rates are too high,” adding that the Fed “always seems to be late for their own party.”
The data shows a sharp slowdown
It’s not just the Dallas survey that’s setting off alarms. Other regional manufacturing surveys from Fed banks paint a similar picture, warning of economic shocks from tariffs.
The Philadelphia Fed’s April survey showed that the index for new orders plunged from 8.7 to -34.2 in March, the lowest level since April 2020. Meanwhile, prices paid by firms rose to the highest level since July 2022.
The Dallas survey also shows indicators flashing warning signs not seen since the early days of the pandemic in 2020.
The general business activity index fell 20 points to -35.8, its lowest reading since May 2020, while the company outlook index declined to a post-pandemic low of -28.3.
Federal Reserve Bank of Dallas
Making matters worse is an ongoing surge in prices paid for raw materials, which surged to 48.4, the highest level since 2022, when inflation was sitting at 40-year highs.
The combination of surging prices and a slowing economy is a worst-case scenario for the Federal Reserve.
That dynamic was summed up by a manufacturer of textile products.
“We will likely need to increase prices, which will likely hurt demand/sales,” the manufacturer said. “We are expecting to get hit on both the supply and demand side.”
Markets will get another manufacturing update this week from the April reading of the ISM Manufacturing PMI. The reading is expected to decline again in April, continuing a downward trend since the beginning of this year.