• The J.P. Morgan Global Manufacturing PMI expanded in July for the first time since January, buoyed by recoveries in demand and production. Output grew at the fastest pace since December 2018 as the sector continues to bounce back from COVID-19 and the severe worldwide recession. Manufacturers expressed cautious optimism about future production.
• Sentiment among the top 10 markets for U.S.-manufactured goods improved in every economy in July, with six markets expanding, up from just four in June and one in May.

• Expanding economies: Brazil (a record high manufacturing PMI), Canada (best since January 2019), China (best since January 2011), France (best since September 2018), Germany (first expansion since December 2018) and the United Kingdom (best since March 2019).
• Still-challenged markets: Japan, Mexico, the Netherlands and South Korea.

• Despite recent progress, manufacturers still need to dig out of a deep hole globally, with industrial production well below the prepandemic pace. Industrial production data in several markets reflect this.
• In seasonally adjusted data, U.S.-manufactured goods exports totaled $566.92 billion through the first six months of 2020, dropping 17.35% from $685.93 billion for the same time frame in 2019, according to TradeStats Express.
• Meanwhile, the U.S. trade deficit declined from $54.80 billion in May, the highest point since December 2018, to $50.70 billion in June.
• Since April 24, the U.S. dollar has fallen 5.2% against a broad-based index of currencies for goods and services, according to the Federal Reserve. Yet, manufacturers continue to cite a strong dollar as a challenge, both to their earnings and for increasing international demand.
• Manufacturers continue to advance efforts with the administration and Congress to open markets, ensure trade certainty and address challenges overseas. Their measures include the following:
  • Monitoring rising tensions in the U.S.–China security, trade and economic relationship
  • Elevating manufacturers’ fight against fake and counterfeit goods
  • Leading industry advocacy in support of a congressional passage of a comprehensive Miscellaneous Tariff Bill
  • Characterizing the Trump administration’s decision to reimpose aluminum tariffs from Canada as a step backward for the United States–Mexico–Canada Agreement
  • Submitting comments to the Trump administration on a series of trade enforcement investigations, including the U.S.–EU large civil aircraft dispute, digital services taxes and imports of vanadium

• Worldwide Manufacturing Activity: The J.P. Morgan Global Manufacturing PMI expanded in July for the first time since January, buoyed by recoveries in demand and production. The headline index rose from 47.9 in June to 50.3 in July, and the sector continues to bounce back even as challenges persist worldwide due to COVID-19 and the severe worldwide recession. Output (up from 47.3 to 51.5) increased at its fastest pace since December 2018, while growth in new orders (up from 46.8 to 50.7) rose to a six-month high. Employment (up from 46.0 to 47.1) and exports (up from 43.5 to 46.9) continued to contract in July but stabilized further. In addition, the index for future output (up from 58.9 to 59.6) continued to signal cautious optimism for a rebound in production over the next six months, with that indicator at its best pace since February.

• Sentiment in Major Markets: Sentiment among the top 10 markets for U.S.-manufactured goods improved in every economy in July, with six markets expanding, up from just four in June and one in May. As such, these major trading partners have continued to steady after plummeting in April to levels that were either the worst since the Great Recession or at record lows. Here are more details on each of these major markets (in order of their ranking for U.S.-manufactured goods exports in 2019):

• Canada (up from 47.8 to 52.9, the best reading since January 2019): New orders, output and employment each expanded in July for the first time since February, while exports stabilized, despite continuing to decline. The positive outlook for future output eased somewhat this month on lingering uncertainties related to COVID-19 outbreaks.
• Mexico (up from 38.6 to 40.4): Mexico once again reported the weakest PMI among the top 10 markets. Activity continued to deteriorate sharply, despite some improvements across the board in all of the key measures.
• China (up from 51.2 to 52.8, the best reading since January 2011): The headline index was buoyed by strong growth in new orders and output, with hiring and exports continuing to stabilize. The index for future output pulled back somewhat but continued to signal optimism for production increases over the next six months.
• Japan (up from 40.1 to 45.2, the highest reading since February): Despite progress across the board, Japanese manufacturing activity remained severely challenged, contracting for the 15th straight month. Yet, the index for future output suggests cautious optimism for very modest growth six months from now.
• United Kingdom (up from 50.1 to 53.3, the best reading since March 2019): A solid rebound in production, which grew at the fastest rate since November 2017, helped buoy overall manufacturing activity in July. New orders also expanded strongly, and hiring and exports stabilized further. The index for future output jumped to a level not seen since March 2018.
• Germany (up from 45.2 to 51.0, the first expansion in activity since December 2018): New orders soared to their best reading since January 2018, with strong rebounds in output and exports in July. Hiring continued to deteriorate sharply. The index of future output rose to a level not seen since August 2018.
• Netherlands (up from 45.2 to 47.9): Manufacturing activity contracted for the fourth straight month, albeit at a slower pace. The market stabilized across the board, particularly for new orders and output. Respondents were upbeat about future production.
• South Korea (up from 43.4 to 46.9): Manufacturing activity has contracted in every month so far in 2020 (and in 19 of the past 22 months). However, the pace of decline slowed to its best reading since February. South Korean manufacturers expect future stabilization over the next six months, with the index of future output nearing neutral.
• Brazil (up from 51.6 to 58.2, a new record high): In July, new orders and output soared in Brazil. Production growth expanded at the fastest pace in the survey’s history, and the market also saw rebounds in employment and exports. Brazil had the highest PMI among the top 10 markets for U.S.-manufactured goods.
• France (up from 52.3 to 52.4, the best reading since September 2018): Output growth jumped at a pace not seen since February 2018, despite a slight weakening in new orders. Employment and exports declined at slower rates in July. Respondents expressed cautious optimism that they would see very modest growth in production over the coming months.

• Regional and National Trends: Here are some other economic trends worth noting.

• China: The Chinese economy grew 3.2% year-over-year in the second quarter, bouncing back from the 6.8% decline seen in the first quarter. Real GDP fell 1.6% in the first half of 2020 relative to the same two quarters in 2019. In June, industrial production grew 4.8% year-over-year, improving for the fourth straight month after dropping by 13.5% year-over-year in January/February. At the same time, fixed-asset investment (down 3.1% year-over-year) and retail sales (down 1.8% year-over-year) both declined at slower rates in June. However, they continued to indicate pullbacks in business and consumer spending, despite some progress.
• Europe: Real GDP plummeted 12.1% in the second quarter, the worst on record and extending the 3.6% decline in the first quarter, according to preliminary data. On a year-over-year basis, the Eurozone economy has contracted 15%. Industrial production jumped 9.1% in June, extending the 12.3% gain seen in May. But, Eurozone production remains well below prerecessionary levels, with output down 12.3% year-over-year. For its part, retail sales rose 20.3% and 5.7% in May and June, respectively, bouncing back from the 10.4% and 12.1% declines seen in March and April. Over the past 12 months, retail spending eked out a gain of 1.3%, which is impressive given the volatility seen since the COVID-19 crisis began. The unemployment rate edged up from 7.7% in May to 7.8% in June.
• United Kingdom: Industrial production rose 6.2% and 9.3% in May and June, respectively. However, output remained 11.6% below where it was in February, illustrating the sharp declines in manufacturing activity seen during the COVID-19 pandemic. Similarly, retail sales soared 13.9% in June, but with spending still off 2.7% since February.
• Canada: After falling 27.9% in April, manufacturing sales rose 10.7% in May, led by the motor vehicles and parts and petroleum and coal products sectors. Still, even with that increase, manufacturing sales remain 31.6% lower year-over-year. In a similar manner, automobiles also helped to lift retail sales, with spending jumping 18.7% in May. On a year-over-year basis, retail sales in Canada have fallen 18.4% since May 2019. In July, the unemployment rate was 10.9%, improving from 13.7% and 12.3% in May and June, respectively. The number of manufacturing workers rose by 29,300 in July, but employment in the sector declined by 107,700 over the past year.
• Mexico: Industrial production rose 17.9% in June in real terms, but it has fallen 17.5% over the past 12 months. Manufacturing production jumped 26.7% in real terms in June, but with a decline of 18.3% year-over-year. [Note: The link is in Spanish.]
• Japan: Industrial production rose 2.7% in June, the first increase since January. However, production has fallen 17.7% over the past year. On the retail front, consumer spending increased 13.1% in June, extending the 1.9% gain seen in May. On a year-over-year basis, retail sales have decreased 1.2%. [Note: The links are in Japanese.]
• Emerging Markets: The IHS Markit Emerging Markets Manufacturing PMI was 51.4 in July, ending five straight months of declines and expanding at its fastest pace since February 2018. New orders (up from 49.7 to 52.2) and output (up from 50.5 to 52.9) accelerated, and employment (up from 47.0 to 48.1) and exports (up from 44.1 to 46.8) stabilized, even as both continued to decline overall. The index for future output (down from 60.3 to 60.1) signaled optimism about production over the next six months, despite easing marginally in July. [Note: There is no link for this release.]

• Trade-Weighted U.S. Dollar Index: Since April 24, the U.S. dollar has fallen 5.2% against a broad-based index of currencies for goods and services, according to the Federal Reserve. The index reflects currency rates per U.S. dollar, suggesting the dollar can purchase somewhat less today than it could a few weeks ago. Overall, the recent pullback reverses the trend seen earlier in the spring, when investors flocked to the U.S. dollar and dollar-denominated assets due to the COVID-19 pandemic. The current trend coincides with signs of improvements in manufacturing activity in the global economy, but it has also been exacerbated by lingering COVID-19 cases in the U.S.

Yet, manufacturers continue to cite a strong dollar as a challenge, both to their earnings and for increasing international demand. Over a longer time horizon, the U.S. dollar has risen 10.8% since Feb. 1, 2018, with 26.7% growth since July 1, 2014.

• International Trade:The U.S. trade deficit declined from $54.80 billion in May, the highest point since December 2018, to $50.70 billion in June. Trade volumes fell dramatically in the spring months as economies slowed globally amid the COVID-19 pandemic. In June, the trade deficit’s decrease can be attributed to goods exports (up from $89.85 billion to $102.87 billion) rising faster than goods imports (up from $166.03 billion to $175.02 billion), even as both rose significantly for the month. To be fair, trade volumes remain sharply lower year-to-date, with goods exports and imports at $137.65 billion and $207.63 billion in December 2019, respectively. In addition, the service-sector trade surplus has also fallen over the past six months, down from $24.30 billion at the end of last year to $21.46 billion in June.

The June goods exports data were boosted by solid growth for automotive vehicles, parts and engines (up $4.91 billion), consumer goods (up $1.35 billion), industrial supplies and materials (up $2.84 billion) and non-automotive capital goods (up $3.77 billion). Declining exports for soybeans and meat helped pull foods, feeds and beverages activity lower (down $470 million). At the same time, increased imports for automotive vehicles, parts and engines (up $9.67 billion), consumer goods (up $4.75 billion) and non-automotive capital goods (up $2.25 billion) were enough to offset very large import declines for industrial supplies and materials (down $8.29 billion).

• U.S.-Manufactured Goods Exports: In seasonally adjusted data, U.S.-manufactured goods exports totaled $566.92 billion through the first six months of 2020, dropping 17.35% from $685.93 billion for the same time frame in 2019, according to TradeStats Express.

• U.S.–China relations heat up with new sanctions, business restrictions; China trade deal hangs on. The U.S.–China security, trade and economic relationship intensified in July, with the Trump administration increasingly vocal and active with steps that appear aimed at fostering and cementing a more broadly confrontational approach toward China on foreign policy, national security and human rights issues. Recent developments include the following:
• On July 14, President Donald Trump signed new Hong-Kong related legislation and an executive order to authorize new sanctions and eliminate U.S. Customs and Border Protection and other rules that had treated Hong Kong as a separate entity from China. The Treasury Department invoked those new rules on August 7, announcing sanctions against key members of Hong Kong’s government, including chief executive Carrie Lam.
• On August 8, President Trump signed executive orders to ban transactions with Chinese technology companies ByteDance (owner of social media app TikTok) and Tencent (owner of messaging and payment app WeChat) based on national security concerns. Both orders go into effect on Sept. 20, with Secretary of Commerce Wilbur Ross to clarify which specific transactions will be covered.
• In late July, the State Department ordered China to close its consulate in Houston, citing concerns about intellectual property theft and spying activities. China’s Ministry of Foreign Affairs responded by ordering the closure of the U.S. Consulate in Chengdu. 
• On July 20, the Department of Commerce added 11 Chinese companies to its Entity List for “human rights violations” in western China’s Muslim-majority Xinjiang province. In a decision reflecting increasing U.S. government scrutiny of business ties in the region, the move will require licenses for companies doing business with these firms.

In the meantime, senior U.S. and Chinese officials continue to affirm close coordination on the U.S.-China “phase one” trade deal, even as prospects diminish for further negotiations on a “phase two” through the rest of this year. The Office of the United States Trade Representative continues to stress close cooperation with its Chinese counterpart on substantive issues such as intellectual property and market access in agriculture and financial services. Ambassador Robert Lighthizer and Chinese Vice Premier Liu He are also scheduled to review Phase One progress in mid-August. China’s purchasing commitments, particularly manufacturing purchases, remain less certain, with mixed reports on how much progress is being made.

Learn more.

• NAM elevates manufacturing fight against fake and counterfeit goods. Highlighting the risk of fake and counterfeit goods facing businesses and consumers during the COVID-19 crisis, the NAM launched a new campaign, a new task force and a new white paper to reverse the rising tide of fake and counterfeit products.
• On July 23, the NAM hosted a launch event that released a new policy paper and featured NAM member company executives, two members of Congress and the head of the U.S. Patent and Trademark Office.
• The paper shows that counterfeiting cost the U.S. economy $131 billion in 2019 and resulted in more than 325,000 fewer American jobs. It outlines specific actions that Congress, the administration and the private sector can take to address this crisis.

• Manufacturers are calling for five specific actions to fight counterfeiting, including legislative solutions to require e-commerce platforms to more proactively screen vendors and products, steps to improve government coordination, reforms to counterfeiting laws and enforcement actions, stronger coordination among private sector actors, and steps to empower consumers to avoid counterfeit products.

Learn more.

• MTB process moves ahead with the United States International Trade Commission’s release of final report. On Aug. 10, the USITC sent Congress a final report on nearly 3,500 petitions for temporary tariff relief for the 2021–2023 period under the MTB.
• The USITC’s final report includes determinations on domestic production and objections to MTB tariff relief by domestic producers, technical changes to the petitions and estimates of tariff revenue loss to the United States.
• The NAM will once again lead industry advocacy in support of congressional passage of a comprehensive MTB by the end of this year that will eliminate tariffs on products not made or available in the United States.

Learn more.

• Trump administration reimposes Section 232 tariffs on aluminum imports from Canada. On Aug. 6, the Trump administration reinstated tariffs of 10% on imports of nonalloyed unwrought aluminum from Canada. USTR argued that the surge of imports of aluminum from Canada has “intensified in recent months, despite a contraction of U.S. demand.”

• Section 232 tariffs on aluminum imports from Canada were removed in May 2019, following the announcement of an agreement between Canada and the United States.
• In a statement responding to the Aug. 6 decision, NAM President and CEO Jay Timmons said that “just a month after USMCA implementation leveled the playing field for manufacturers, we were surprised” to see the announcement. He added that the action is a “step backwards for a historic trade agreement that restored trade certainty and empowered our industry.”

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• Export-Import Bank seeks comments on Private Export Funding Corporation partnership; announces virtual conference. On July 27, the Ex-Im Bank published a notice in the Federal Register seeking comments on the request to renew the bank’s partnership with PEFCO. It also officially announced that its annual conference will be virtual in 2020.

• PEFCO was created in 1970 as a public–private partnership, and it entered an official partnership with the Ex-Im Bank in 1971. PEFCO is a direct export finance lender and a secondary market buyer of export loans originated by other lenders. To be eligible for PEFCO financing, all loans must be guaranteed by the Ex-Im Bank, which supervises PEFCO. This partnership must be renewed by the Ex-Im Bank’s board of directors this year. The Ex-Im Bank is seeking input from the public on the merits, proposed modernizations or challenges with PEFCO, to help inform the decision to renew the partnership.
• The Ex-Im Bank’s Annual Conference will be virtual in 2020. It will take place from Sept. 9 to 11. The theme is Keeping America Strong: Empowering U.S. Businesses and Workers to Compete Globally. Find more information here.

Learn more.

• EU strikes down EU–U.S. Privacy Shield framework; NAM joins industry letters urging talks on a successor agreement. On July 16, the Court of Justice of the European Union issued a decision to invalidate the EU–U.S. Privacy Shield, a critical legal mechanism implemented in 2016 that enables more than 5,300 U.S. companies to transfer data between the European Union and the United States.

• The NAM joined this multi-association letter, which was sent on July 30 to Secretary Ross, European Commissioner Didier Reynders and European Data Protection Board Chairwoman Dr. Andrea Jelinek. The letter urges the United States and European Union to begin immediate negotiations on a successor agreement to the EU–U.S. Privacy Shield to provide a legal framework to ensure continued EU-U.S. data flows.
• In an earlier action on July 17, the NAM joined a separate multi-association letter that was sent to Secretary Ross. This letter encourages the Trump administration to work collaboratively with its EU counterparts “to develop a stable and sustainable mechanism for companies to transfer data between the European Union and the United States.”

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• USTR Announces Modification to Enforcement of U.S.–EU Large Civil Aircraft Dispute. On Aug. 12, USTR announced a modification to the list of products that are subject to WTO-authorized additional duties in the U.S. challenge at the WTO over subsidies for large civil aircraft provided by the European Union, France, Germany, Spain and the United Kingdom.

• The tariff modifications will take effect on Sept. 1, 2020.
• On July 24, the NAM submitted comments in response to USTR’s recent announcement of a review of U.S. enforcement in the dispute.

Learn more.

• NAM Submits Comments to USTR on Section 301 Digital Tax Investigation; USTR Announces Action on France’s Digital Services Tax Investigation. On July 15, the NAM submitted comments in response to USTR’s Section 301 investigations into digital services taxes that have been adopted or are being considered by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom.

Additionally, on July 10, USTR announced a decision to impose additional duties of 25% on imports from France as a result of a separate investigation of France’s digital services tax. USTR also announced a suspension of the application of the duties for a period of up to 180 days.

Learn more.

• NAM submits comments on Commerce Section 232 investigation on vanadium imports. On July 20, the NAM submitted comments to the Trump administration on the Department of Commerce’s Section 232 investigation into whether imports of vanadium into the United States threaten to impair U.S. national security.

Learn more.

• Direct Line: Jordan’s Public–Private Partnerships, Opportunities for U.S. Companies
  Aug. 12 (Register by Aug. 11)
  10:00 a.m. ET
  This webinar will allow U.S. companies to discover public–private partnership opportunities in Jordan. The webinar is free and open to all U.S. businesses. It will be hosted by Mike Hankey, U.S. deputy chief of mission to Amman, and Mahmoud Khashman, advisor to the prime minister and head of the National Public–Private Partnership Program. The event will be of particular interest to the businesses in the transport, construction, logistics and engineering sectors. Learn more.

• For a listing of upcoming U.S. Trade and Development Agency missions, click here.

• For a listing of upcoming Commerce Department trade missions, click here.

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