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US manufacturing slows further in May amid trade disputes

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Washington (AFP)

US manufacturing activity slowed again in May as Washington and Beijing drifted further from a trade agreement, according to an industry survey released Monday.

The report by the Institute for Supply Management still showed positive activity but an official with the group described the situation as "near-zero growth" and warned that President Donald Trump's announcement last Thursday of fresh tariffs on Mexico could have a big negative impact.

"As long as demand remains strong, you can work through the rest of the issues," said Timothy Fiore, chair of ISM's manufacturing survey.

"But demand is clearly slowing."

The May report included the impact of the latest tariff announcements in the US-China dispute. The Mexico announcement was too late to figure in the May report but it will be a factor in next month's data, Fiore said.

Overall, the group's purchasing managers index came in at 52.1 last month, down from 52.8 in April, the second decline in a row. Any reading above 50 percent indicates growth.

Troubling signs on demand included barely positive new orders and a drop in backlog from the prior month, Fiore said.

More positively, the employment rating rose and several companies quoted described business conditions as strong.

Fiore said last week's Trump announcement on Mexico could be a big hit, in part because there has been no almost no lead time and the financial impact could be severe, especially at higher tariff levels.

The White House, linking trade to Trump's push against illegal immigration, announced a five percent tariff on Mexican goods to take effect on June 10, rising potentially to 25 percent later in the year.

Compared with China, "the issue around Mexico is going to be much more severe," Fiore said.

"The question is what happens on June 10 when the first 5 percent goes into place," Fiore said. "Not only do you have lead-time issues, because not everything is going to be dutied, but you also have the financial implications of it all."

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