Taking Businesses’ Temperature Post-‘Liberation Day’

For weeks, we have heard a lot of talk about how the Trump administration’s “Liberation Day” tariffs will affect commerce. Conventional wisdom says the hit will be very, very bad—partly because businesses globally pulled forward activity just in case, but mostly because tariffs discourage trade and, therefore, production. Stocks’ rapid decline in Liberation Day’s aftermath looked like markets pricing in the worst-case scenario of steep tariffs whacking commerce globally. Yet as data start trickling in, we are seeing reality starting to go better than expected.

The data to which we refer are flash purchasing managers’ indexes (PMIs) for April. PMIs, for those of you who don’t share our nerdy data devotion, are business surveys. They don’t report actual output, but they ask companies whether results across a range of indicators (output, new orders, employment, costs, etc.) was the same, better or worse than the previous month. The survey provider—in this case, S&P Global—computes this into index levels. Readings over 50 indicate more than half of responding firms reported expansion, while under 50 means contraction. So if tariffs brought an immediate, major impact, we would expect to see PMIs deeply below 50 across the board, particularly in manufacturing.

Instead, as Exhibit 1 shows, the results mostly matched the recent trend. All reporting nations except the US endured manufacturing contractions, but aside from the UK, the contractions were largely in line with March and milder than recent months. Given the UK faces only the 10% blanket tariff rate, we suspect its decline had more to do with local concerns over tax hikes and a weak domestic economy, as well as ongoing hiccups for retooling at major steel mills. Meanwhile, US manufacturing’s expansion and overall improvement suggests tariffs didn’t suddenly stanch the flow of imported components and raw materials.

Exhibit 1: Manufacturing PMIs

Source: FactSet, as of 4/23/2025.

Interestingly, more material deterioration happened in services, which is theoretically much more insulated from tariffs. After all, tariffs target physical goods. This will affect services firms that need to stock up on supplies or replace equipment, but that is a matter of cost pressures, not overall activity. Said another way, hairdressers and accountants likely shouldn’t suddenly lose business because of tariffs. We can see an argument that overall uncertainty caused some outfits to hit pause, but this doesn’t seem like a direct, fundamental tariff effect. Rather, it is a trend worth watching to see if activity picks up as we move past April’s various dust-ups.

Exhibit 2: Services PMIs

Source: FactSet, as of 4/23/2025. We didn’t forget Japan—they just don’t have a flash Services PMI. Sad.

Again, this is just one suite of surveys conducted in the 10-ish days after Trump paused reciprocal tariffs on April 9. Timely, interesting, but one data point and not all-telling. We will need more time and a broader array of data to see the true effects. And of course, further tariffs or retaliation are always worth monitoring. But so far, the little data we have suggests things seem to be going not quite as bad as expected. And when expectations are as low as they are now, that can be all stocks need for bullish positive surprise.