Manufacturing PMI Hits 8-Year High Six Months Into China Tariff Phase-Up

The Institute for Supply Management's April Manufacturing PMI registered 56.4, the strongest reading since 2018 and the sixth consecutive month of expansion, the trade group reported Wednesday.

The new orders sub-index, often a leading indicator for output six months out, hit 60.3 — territory not seen since the post-pandemic recovery distortions of 2021. The employment sub-index moved into expansion for the first time in 26 months.

What the tariffs are doing

The administration's six-month-old phase-up of Section 301 tariffs on Chinese imports — which lifted average effective rates from 19% to 38% across covered categories — is generating a measurable substitution effect that the official models had projected to be smaller than what's now showing up.

Three patterns stand out in the data:

• Re-shoring announcements tracked by Reshoring Initiative are running at three times the pace of 2024 — 187,000 announced jobs in Q1 alone. The pull-through rate from "announcement" to "operating facility" historically runs about 70% over three years.
• Capital goods imports from China are down 41% year-over-year. The same category from Mexico, Vietnam, and India is up a combined 33%, suggesting the substitution is partly genuinely domestic and partly nearshoring.
• The producer price index for domestically made manufactured goods is running at 4.1% annual — meaningfully above the consumer inflation rate. Manufacturers are getting pricing power for the first time in a generation.

What the critics warned about

The economic-policy mainstream — including a notable share of conservative economists at AEI and the Hoover Institution — warned the tariff phase-up would generate retaliatory measures, hit consumer prices first, and erode purchasing power before any re-shoring benefit materialized.

The first prediction has materialized. China imposed retaliatory measures on U.S. agricultural exports in February, and soybean and pork shipments to China are down sharply. The second has not, at least not yet: consumer goods inflation excluding energy is running at 2.4%, slightly below its pre-tariff trend. The third is unmeasurable in real time.

What the next six months will reveal

The cleanest test of the policy's durability is whether the manufacturing rebound persists once the inventory effect fades. Right now, importers and U.S. manufacturers are working through inventory positioned during last year's pre-tariff window. By Q3, that buffer is exhausted and the underlying steady-state demand picture should be visible.

If the PMI holds above 55 through the summer, the policy will have survived its first credibility test. If it rolls over, the political case for the tariff posture gets harder by the week — particularly with consumer-side fuel inflation already pinching middle-class households.

Treasury Secretary Scott Bessent, in a brief Tuesday Q&A, declined to forecast. "We trust the data," he said. "And we're not going to flinch on a posture that's been six months in the making because Wall Street had a nervous Tuesday."