Dive Brief:

• The U.S. service sector expanded in April for the 10th straight month despite a blitz of tariffs by the Trump administration and plans to slash federal spending.
• An index derived from the Institute for Supply Management’s Services Business Survey rose to 51.6% last month, 0.8 percentage point higher than in March and above the 50% threshold between expansion and contraction. An ISM gauge of prices rose 4.2 percentage points to the highest level since January 2023.
• “Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures, Steve Miller, chair of the ISM services survey committee, said Monday in a statement. “Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”

Dive Insight:

The service industry, which fuels more than two thirds of U.S. economic growth, was excluded last month when President Donald Trump announced the highest tariffs in decades, with 10% baseline import duties imposed on most trading partners and 145% levies on imports from China.

Trump on Sunday, however, said in a social media post that he had authorized 100% tariffs on films produced outside the U.S.

“The Movie Industry in America is DYING a very fast death,” Trump said.

“Other Countries are offering all sorts of incentives to draw our filmmakers and studios away from the” U.S. in “a concerted effort” that poses a threat to national security, he said. “Hollywood, and many other areas within the U.S.A., are being devastated.”

The U.S. for years has generated a trade surplus in services such as tourism, financial services, information technology and health care. The sector logged a $293.3 billion surplus last year, according to the Bureau of Economic Analysis.

Eleven service industries reported growth last month, including arts, entertainment and recreation; retail trade; health care and social assistance; and transportation and warehousing, the ISM said. Agriculture; finance and insurance; construction; and public administration were among six sub-sectors that faced contraction.

“Our business is in a state of crisis with uncertainty caused by both the ongoing trade war and the threats to federal funding of programs,” a survey respondent in public administration told the ISM.

Trump has said that tariffs will lure foreign investment, revive manufacturing, improve the U.S. fiscal outlook and reinforce national security.

“Our goal with trade policy is to level the playing field for our great American workers and companies,” Treasury Secretary Scott Bessent said Monday. “With a level playing field, American industry can out-compete all challengers,” he said in a speech.

“Since he assumed office in January, companies have pledged to invest trillions into the U.S. economy,” Bessent said, adding “President Trump has secured more investment for our country in 100 days than President Biden did during all four years.”

Yet many economists say that inflation will probably rise and U.S. manufacturing is unlikely to expand during a trade war triggered by high, widespread tariffs. Also, they expect that consumers will bear most of the costs from import duties.