Despite tariff uncertainty and faltering export orders, the latest global PMI data shows that economies across the U.S., Europe, and Asia are weathering the storm. Domestic resilience, inventory dynamics, and targeted fiscal measures are cushioning the blow as companies recalibrate to shifting trade realities.
Private Sector Momentum Holds Firm in the U.S. and Asia
Business activity in the U.S. surged in July, with the S&P Global composite purchasing managers’ index (PMI) rising to 54.6 from 52.9 in June, the strongest reading this year and a clear sign of expanding private sector output. The rebound follows a volatile first half, marked by an early-year contraction as firms raced to build inventories in anticipation of higher U.S. tariffs. That stockpiling now appears to be driving Q2 growth, though economists warn of a likely pullback in global suppliers whose orders fed the surge.
The effects were uneven globally. India’s manufacturing sector remained a standout, continuing to log growth in overseas orders that supported its rapid expansion. But in Japan and Australia, export demand slipped, even as broader economic activity remained positive. Rising input costs also returned to the spotlight in the U.S., where inflationary pressures picked up again. According to S&P Global’s Chris Williamson, tariffs were cited as the most common reason for both cost increases and price hikes passed on to customers.
Europe Balances Inventory Shifts and Policy Support
In the eurozone, new business stabilized while export orders declined modestly, mirroring a broader pattern of frontloaded shipments to the U.S. earlier this year. ING’s Carsten Brzeski noted that while near-term data remains skewed by U.S. inventory effects, PMI indicators suggest Europe’s economic pulse is holding steady. A recent rise in European equities and a growing fiscal response, particularly in Germany, are helping offset the external shock.
The U.K. reported more acute challenges. British manufacturers experienced delays, postponed capital investments, and increased international competition following recent U.S. tariff announcements. Meanwhile, European Central Bank officials kept interest rates steady, acknowledging both the bloc’s current resilience and the “exceptionally uncertain” environment ahead, driven in large part by trade frictions.
Notably, European officials are advancing a proposed tariff agreement with the Trump administration, reportedly aligning on a 15% tariff level across most categories, an outcome that could provide a more predictable framework for exporters, though details remain under negotiation.
What the Current Resilience May Be Masking
While the latest figures paint a picture of short-term stability, they may also be obscuring deeper structural risks. The surge in private-sector output, especially in the U.S., is underpinned by stockpile-driven distortions rather than sustained end-demand. As those buffers normalize and trade pacts reset tariff baselines, companies may find themselves facing softer demand, tighter margins, and reduced pricing power. For policymakers and firms alike, the challenge isn’t just riding out the turbulence, but recalibrating strategy for a trade environment where volatility may become the new normal.