Why did US Industrial Production Fall in March?

US industrial production dropped 0.5% in March according to statistics published by the Federal Reserve. Likewise, manufacturing output ticked down 0.1% in March.

The Federal Reserve's April 2026 Beige Book found that US manufacturers' key concerns were the rising price of oil and raw materials as well as ongoing concerns around tariffs. 

Manufacturing output

According to the Federal Reserve, industrial production fell 0.5% while manufacturing output ticked down 0.1%. 

In March, a decrease of 0.2% in the production of durable goods reflected weaker output of motor vehicles and parts, which fell 3.7%, as well as declines in the output of primary metals, machinery, furniture and related products. 

Nondurable manufacturing output edged down 0.1%, with more industry groups posting losses than posting gains, according to data from the Federal Reserve.

Why is this happening?

The Federal Reserve's Beige Book (formally known as the Summary of Commentary on Current Economic Conditions by Federal Reserve District) found that the conflict in the Middle East was having an impact on manufacturers' supply chains. 

It found that manufacturers have reported concerns that the conflict in the Middle East resulted in shortages of raw materials and energy as well as ongoing concerns around tariffs.

Some manufacturers reported particularly sharp increases in the cost of steel, plastics and electronics. Materials costs continued to rise, particularly for metals like copper, steel and aluminium with manufacturers citing tariffs as drivers. 

Some US manufacturers reported uncertainty surrounding tariffs and the conflict in the Middle East as their firm's greatest challenge. 

Some highlighted escalating energy costs related to the conflict in the Middle East, with some describing fuel costs as “skyrocketing”.

War in the Middle East 

The closure and ongoing uncertainty surrounding the passage of ships through the Strait of Hormuz, which accounted for nearly 34% of the global crude oil trade in 2025 according to the IEA, has seen oil and fuel prices rise and had a knock on impact on businesses. 

Some manufacturers are also dependent on the Strait of Hormuz for raw materials.

Helium, needed for semiconductor manufacturing, passes through the Strait of Hormuz, as does aluminium needed for automotive manufacturing.

Tariffs are still a major concern

Since coming to power, US President Donald Trump has imposed a variety of tariffs on imported goods. These measures have hit small, medium and large businesses in different ways. 

They can impact the cost of importing raw materials needed for manufacturing, or the cost of importing goods that are manufactured offshore for sale in the US. 

Ford said in its 2025 Earnings Call that it has taken a roughly US$900m/US$1bn hit as a result of tariffs in 2025. Ford CEO, Jim Farley said: “That's a US$1bn higher tariff impact than we communicated just in October due to the unexpected and late year change in tariff credits for auto parts.” 

According to CNBC, Apple has paid roughly US$3.3bn in tariffs since they were initiated. 

A February 2026 report from JP Morgan Chase found that monthly tariff payments by midsize firms tripled since early 2025.