According to data released on Tuesday, the manufacturing sector experienced a contraction for the first time this year, with rising costs due to concerns about President Trump's tariff policies. The Institute for Supply Management's manufacturing Purchasing Managers' Index (PMI) dropped to 49.0 in March, below the expected 49.5 and down from February's 50.3. A PMI reading above 50 indicates expansion, while below 50 indicates contraction.

The prices paid index surged to 69.4, the highest since June 2022, reflecting increased costs for companies. The rise in prices was attributed to tariffs, resulting in order backlogs, delayed supplier deliveries, and inventory growth.

Another manufacturing PMI reading by S&P Global in March also showed a decline, raising concerns about the impact of tariff uncertainties. Despite registering above 50 for the third consecutive month, the index only showed marginal improvement, with production decreasing for the first time since December.

S&P Global highlighted that while business confidence remains relatively high, manufacturers are becoming more skeptical about the long-term benefits of current policies. The uncertainty caused by tariffs and other factors may lead customers to delay or cancel spending, impacting costs and supply chains.