The Dallas Federal Reserve's business activity index for the Texas region fell 20 points to -35.8, the lowest reading since May 2020.

The impact of President Donald Trump's "reciprocal tariffs" has begun reverberating across the domestic economy, with regional manufacturing activity data released on Monday showing contraction by the sector.

The Dallas Federal Reserve's business activity index for the Texas region fell 20 points to -35.8, the lowest reading since May 2020. A negative reading denotes a contraction in activity.

Data for the survey was collected April 15-23, with responses from 87 of the 117 manufacturers in Texas.

The outlook index for companies also fell to a post-pandemic low of -28.3, while the outlook index for uncertainty surged 11 points to 47.1.

The production index — a measure of manufacturing conditions, remained largely unchanged at 5.1, signaling growth.

On the other hand, new orders plunged 20 points to -20, capacity utilization edged down to -3.8, and the shipments index fell to -5.1 from 6.1 March. 

Firms were trimming their workforce and adopting shorter workweeks in April, although the employment index remained largely unchanged at -3.9. The index for hours worked fell to -6.4 from -2.9.

The survey also found an acceleration in pricing pressures, with raw material and finished goods prices surging higher.

Meanwhile, most metrics for expected manufacturing activity for six months ahead, though remaining positive, retreated sharply from the month-ago levels.

Among the qualitative comments shared, an executive from the printing and related support activities said recession concerns would impact demand.

A computer and electronic product manufacturing industry executive from the predominantly Republican state said, "A lack of a plan and the arbitrary nature of the tariffs are killing business."

Another executive spoke about "significant chaos." 

Trump's sweeping tariffs on trading partners, which have now been stalled for 90 days for most nations except China, threaten a a trade war with China. Precipitation of the crisis could lead to a recession in the U.S. and a flaring up of inflationary pressure.

The president assuaged concerns earlier this week by suggesting that tariff revenue will help reduce Americans' income taxes and bring manufacturing jobs to the U.S.

For the year-to-date period, the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust (QQQ) ETF are down over 5.8% and 7.4%, respectively.

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