China Tariffs Boosted Manufacturing Orders in October

WASHINGTON, DC - NOVEMBER 16: U.S. President Donald Trump and first lady Melania Trump leave after a presentation ceremony of the Presidential Medal of Freedom at the East Room of the White House November 16, 2018 in Washington, DC. The award is the the nation's highest civilian honor that present …

The brightest spots in the disappointing report on long-lasting factory goods in October were the market segments impacted by the Trump administration’s China tariffs.

Overall, new orders for durable goods were down 4.4 percent, a bigger than expected drop. This was largely driven by steep declines in the volatile defense and aircraft segments. Core durable goods was flat, which was below the expectations for a modest increase but better than the headline figure might suggest.

But the details reveal a silver lining for supporters of the Trump administration’s trade policy–and U.S. workers and high tech manufacturers.

The Trump administration imposed tariffs on an additional 10 percent tariff on $200 billion of Chinese goods at the end of September, bringing the total amount of Chinese goods subject to tariffs up to $250 billion, making October the first month in which the new tariffs might be expected to show up in the data.

While the Commerce Department’s durable goods report is broken down into very broad categories, the October report suggests products that would be expected to be affected by tariffs got a boost.

Orders for communications equipment rose 3.2 percent in October, and are now up 7.2 percent from a year ago. Orders for computers rose 1 percent, reversing several months of decline.

Orders for appliances rose 2.9 percent. This is particularly surprising given signs of weakness in the housing market and the strong connection between home purchases and appliance sales.

Orders for fabricated metals products rose 1.0 percent.

These gains are all the more striking because of the overall weakness. They imply that the tariffs are shifting demand from imports to domestically produced goods. And they suggest that domestic manufacturing is continuing to expand.

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