Global Manufacturing Slumps as US Tariffs Weaken Factory Output and Export Demand

Major factory economies worldwide struggled to gain momentum in October, with new global orders hit by weaker US demand and persistent tariff pressures from Washington, according to business surveys published on Monday. The euro zone saw factory output barely move as new orders remained flat, leading to staff cuts in many plants. Germany, typically the region's production engine, faced continued challenges, with engineering orders plunging in September and firms remaining pessimistic.

France and Italy reported weak performances, while Spain was a rare bright spot with faster expansion than in September. In Britain, factories recorded their best monthly reading in a year, but this was largely attributed to the temporary recovery of Jaguar Land Rover after a cyberattack, suggesting the rebound could be short-lived.

In Asia, US President Donald Trump's diplomatic efforts, including a one-year delay to some reciprocal tariffs with China and South Korea, provided minor relief. However, exporters remained cautious, with China's private-sector PMI falling to 50.6 in October from 51.2 in September, and export orders declining at the fastest rate since May. China's official PMI contracted to 49.0, marking the seventh consecutive month of decline, indicating that the earlier rush to ship goods before tariff hikes has completely faded.

The recent US-China trade deal included halving fentanyl-related tariffs to 10%, suspending China's rare earth export restrictions, and pausing certain US investigations. Despite this, economists warned that the agreement is narrow and does not resolve deeper US-China tensions. Goldman Sachs raised its China growth forecasts to 5% for 2025 and 4.8% for 2026, but China's overall economic growth slowed to 4.8% in the third quarter, the weakest in a year, with fixed-asset investment declining for the first time since 2020.

Other regions showed mixed results: South Korea's tariff agreement was seen as a hedge rather than a win, India posted faster growth supported by local demand, while Malaysia and Taiwan remained weak, and Vietnam and Indonesia picked up pace.