American manufacturing activity continued to expand for the second straight month in February, but producers are still struggling in the throes of President Trump’s inflationary tariff policy.
The Institute for Supply Management on Monday said its manufacturing purchasing managers’ index was 52.4 last month, down only slightly from January’s surprisingly strong 52.6. Index readings above 50 indicate an expansion — this was just the third reading above that threshold in the past three years. The index for prices paid jumped a whopping 11.5 points, however, to 70.5, the highest price index since 2022 and a continuation of a 17 month trend.
The report was a promising sign for the manufacturing sector, which has been battered by weak demand. But factories reported higher prices on every commodity but freight, with several manufacturers attributing these price increases to tariffs. That’s a bad sign for a Trump administration seeking to tamp down inflation and to convince the Federal Reserve to lower interest rates.
“The Section 232 tariff policy is having the exact opposite effect of their intention on an American manufacturer like us: It is raising prices while lowering demand and profitability,” said one respondent in transportation services.
The Supreme Court last month ruled against tariffs that the Trump administration had imposed under the International Emergency Economic Powers Act. But the full impact of the ruling remains to be felt, as President Trump followed the ruling with a universal 10% tariff for at least the next 150 days.
Tariffs aren’t the only factor casting a shadow on the manufacturing sector. The ISM report came as the US, alongside Israel, entered its third day of war against Iran. As the war expands and chaos spreads, Iran’s closure of the Strait of Hormuz looms as a foreboding source of further price upheaval. For one thing, the UAE and Bahrain accounted for 23% of American imports of unwrought aluminum in 2025, according to S&P Global Market Intelligence’s Global Trade Atlas, and aluminum is already what the most survey respondents by far listed as the material suffering from too high prices.
Still, there were promising signs for the sector. Customers’ inventories were deemed “too low,” while backlogs of orders were said to be quite high, suggesting demand remains strong. Production and new orders have slowed down slightly but are still up overall. While employment is contracting, it has improved since January. With low customer inventories to replenish and backlogs of orders to fill, manufacturing looks primed for action in the coming months.
A respondent in fabricated metal products felt more optimistic.
“Business is improving by the week. Backlog is growing, and new opportunities are everywhere.”