U.S. manufacturers, increasingly alarmed by rising recession risks, are pressing the Federal Reserve to lower interest rates as tariff uncertainty continues to weigh heavily on business planning and sales, according to the latest survey from the Federal Reserve Bank of Dallas.
The survey revealed that the Dallas Fed’s manufacturing business activity index has fallen to its lowest level since May 2020, underscoring the growing pessimism across the sector. Many manufacturers cited the unpredictability surrounding trade policy as a critical factor hampering their operations.
Participants in the survey, representing a broad cross-section of industries, expressed deep concern about the ongoing volatility created by shifting tariff policies. One executive in the computer and electronics sector noted, "We have seen a 25% decline in incoming RFQs [requests for quotations] in April compared with the average of previous months. If this trend persists, we anticipate a 10–15% drop in sales for May."
Another manufacturer emphasized that the constant flux in tariff headlines makes forward planning virtually impossible. "It’s difficult to plan accurately even six weeks ahead, much less six months," the respondent said. The executive warned that prolonged uncertainty could be catastrophic for smaller firms, stating, "If this continues for any length of time, many small companies are at serious risk—potentially worse than what we saw during the COVID shutdown in 2020."
The survey responses suggest that tariff-induced volatility is now seen as a greater and less understood threat to business viability than even the pandemic-related disruptions of recent years.
Many manufacturers also directed their frustrations toward the Trump administration, urging a more targeted and strategic approach to trade negotiations. One respondent advocated for using "a scalpel rather than a sledgehammer" when crafting tariff policies, emphasizing the need for precision and predictability to support long-term business health.
The pressure on the Federal Reserve was equally pointed. A growing number of manufacturers are calling on the central bank to act decisively by cutting interest rates to help stabilize the economic environment. "Please lower interest rates," one respondent urged. "We need it to help counteract the uncertainty and tariffs and to provide a necessary boost to the economy."
A manufacturer in the transportation equipment industry echoed these sentiments, criticizing the Fed for its delayed reactions to economic stresses. "Interest rates are too high," the executive said. "The Fed always seems to arrive late to their own party."
The cumulative feedback paints a bleak near-term outlook for the manufacturing sector. Businesses report declining order volumes, disrupted supply chains, and eroding confidence in future investment planning. For many, the combined pressure from elevated rates and tariff volatility risks creating a vicious cycle of reduced capital expenditures, slower hiring, and contracting output.
Several manufacturers also noted that the current environment has strained relationships with suppliers and customers alike, as firms attempt to navigate rising costs and unpredictable demand. "It’s very difficult to maintain long-term commitments when we don't know what the landscape will look like in 90 days," one respondent commented.
The Dallas Fed survey serves as a stark reminder that despite broader resilience in some areas of the economy, key sectors remain highly vulnerable to policy uncertainty and monetary tightening. While the labor market has continued to show strength and consumer spending has remained relatively steady, manufacturing—a historically important indicator of economic momentum—is flashing clear warning signals.
From a wealth management perspective, the survey’s findings highlight important risks for portfolios with significant exposure to industrials, manufacturing, and trade-sensitive sectors. Registered investment advisors and wealth managers may want to consider defensive positioning and increased client communication around the heightened volatility tied to trade policy and Fed rate decisions.
The situation also reinforces the need for diversification across asset classes and geographies, particularly as recession probabilities rise. Alternative assets, high-quality fixed income, and sectors less exposed to tariff shocks may warrant a closer look for high-net-worth and ultrahigh-net-worth clients aiming to preserve capital in an increasingly uncertain macroeconomic environment.
Advisors should also be prepared to help clients manage expectations around interest rate policy. While manufacturers are clearly calling for immediate rate cuts, the Fed has signaled a data-dependent approach, and cuts may not materialize as quickly as businesses hope. Positioning portfolios for a slower and more volatile path to rate normalization could prove critical in the months ahead.
Overall, the Dallas Fed’s manufacturing survey adds to the growing chorus of concern about the health of the U.S. economy. For financial advisors, staying attuned to these developments and proactively adjusting client strategies will be key to navigating the challenges ahead.
