U.S. business activity slows in April amid rising tariff concerns

Data released on Wednesday showed that the U.S. Flash Composite PMI Index—which measures activity across both the manufacturing and services sectors—fell to 51.2 in April, down from 53.5 in March, marking the lowest reading since December 2023.

The manufacturing sector showed slight resilience, with the Manufacturing PMI edging up to 50.7 from 50.2 in March, staying just above the expansion threshold. However, the services sector experienced a sharp slowdown, dropping to 51.4 from 54.4 in March and falling short of expectations (52.8).

The decline in overall business activity and the uptick in prices for goods and services were largely attributed to rising uncertainty over tariffs and their potential drag on the economy. These developments have raised concerns about stagflation—a scenario where the Federal Reserve could find itself caught between battling inflation and supporting growth.

Markets remain uneasy about the potential escalation of the trade war after the U.S. imposed steep 145% tariffs on nearly all Chinese imports. In response, China hit back with a 125% tax on U.S. goods and made a pivotal move by cutting ties with Boeing, signaling a deeper rift.

However, a more measured tone from President Trump and indications that tariffs may be significantly reduced (though not fully eliminated) have sparked some optimism that the worst-case scenario—global economic disruption from an intensifying trade conflict—might be averted.