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Trade dispute a 'big headwind' but US manufacturing sees solid growth: report

[WASHINGTON] US trade disputes and the prospect of even more tariffs on China is a "big headwind" to American manufacturing but the sector still expects solid growth this year, according to an industry survey released Wednesday.

The world's two leading economies face a possible make-or-break moment when top negotiators meet in Washington this week following months of fraught talks under the shadow of US plans to impose steeper tariffs on China.

While manufacturing growth projections have fallen since December, firms expect revenues to increase by four percent this year, which is "still very strong growth," according to Timothy Fiore of the Institute for Supply Management.

A semi-annual ISM survey on manufacturing shows companies "more and more are passing price increases on to customers because of tariffs," Mr Fiore told reporters, pointing to some "really alarming" signals on trade that had showed up in ISM's earlier monthly reports.

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But, having adapted to existing tariffs, the sector is now steeling itself for an even bigger hit, after Mr Trump announced plans to more than double existing tariffs on US$200 billion in Chinese goods to 25 per cent starting Friday.

Mr Fiore said the increased tariffs likely will stay in place for months creating "a big headwind coming our way." And among the goods impacted a "big part of that are intermediate goods."

However, relative to the size of the US economy the amount of tariffs "shouldn't be moving the needle that much," even though it has undercut sentiment.

Anthony Nieves, who heads the ISM survey of the services sector, said the tariffs are "impacting their economy a lot more than what we're feeling over here in the states. There's a lot of pressure on them."

In fact, China reported early Wednesday that exports fell by more than expected in April, dropping 2.7 per cent even as its surplus with the United States remains large - something US negotiators are seeking to remedy in the trade talks.

Mr Fiore said the supply chain managers "are pretty resilient" and far fewer firms now report disruption as a result of the tariffs.

US and Chinese officials are due to meet Thursday and Friday, and Mr Trump said on Twitter earlier Wednesday that they are coming to "make a deal."

AFP