Dallas Fed: Tariffs Already a Drag on Texas Manufacturing Economy

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The Federal Reserve Bank of Dallas reports that the steel and aluminum tariffs recently imposed by President Trump are already having an impact in slowing down the previously high-flying Texas manufacturing industry, News Radio 1200 WOAI reports.

In its quarterly Manufacturing Outlook Survey, the Dallas Fed discovered both factory utilization and shipments down sharply in March, and labor market measures indicated that conditions for workers were weaker for both employment figures and workweek length.

Rey Chavez, President of the San Antonio Manufacturers Association, says the tariffs on key raw materials imported from China and potentially other nations hurt his industry because they drive up prices at a time when buyers, both industrial and consumer, are very price conscious

."Any increases in prices are really going to go to the consumer," he said.  "That is a big concern that we have."

Every single indicator int he manufacturing summery except for one, prices paid for raw materials, is down in the March Dallas Fed survey.  New orders and shipments are down sharply, finish good inventories, hours worked, and, critically, capital expenditures, are also down.

Chavez says another potential challenge is the retaliatory measures that China and other nations are likely to take, which he says will hurt Texas exports.Texas is by far the largest exporting state in the USA."There is a concern on that," he said.  "That will not only affect manufaturers, but that will affect the agricultural business."

The Dallas Fed reports that despite this weakness, there is still optimism in the sector, with leading indicators of company outlook and federal business activity trending upward, as they have for the last 19 months.

Chavez says there are trade imbalances which need to be rectified, and he hopes that the tariffs are a short term negotiating strategy by President Trump to restart talks toward 'fairer' trade agreements."I think that is what the overall game plan is," he said.  "We have our fingers crossed that that will happen."

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