Global manufacturing was the weakest since 2012 last month, a victim of mounting trade tensions and further reason to worry that the world economy is weakening.

With softness in Germany, Japan, the UK – as well as the lowest US result in a decade – IHS Markit’s global Purchasing Managers Index fell to 49.8 in May, below the 50 level that divides expansion from contraction.

The reports underscore the growing threat posed by the escalating US-China trade war, and they coincided with a fresh warning from Wall Street about recession risks.

US President Donald Trump has also threatened Mexico with tariffs, adding to market concern, boosting demand for bonds and pushing stocks lower. On Sunday, China released a document blaming the US for a breakdown in trade talks and accusing it of unreasonable demands.

Morgan Stanley has warned that investors continue to underestimate the situation. It sees a global recession within nine months if Trump imposes 25% tariffs on an additional $300-billion of Chinese exports and Beijing retaliates.

In the US, the main purchasing managers index unexpectedly fell in May to the lowest level since October 2016, according to an Institute for Supply Management report Monday. A separate PMI by IHS Markit fell to the weakest level since 2009.

European and US stocks declined on Monday, extending the declines seen in May. German bonds rose, pushing the country’s ten-year yield further below zero.

“The last few weeks has undoubtedly unsettled investor confidence,” Julian Chillingworth, chief investment officer at Rathbones, said on Bloomberg Television. “The uncertainty that’s crept into investors’ thinking has occurred because of the unpredictability.

In the UK, where Brexit uncertainty is proving an additional burden, manufacturing shrank for the first time in almost three years in May. That’s partly due to pullback after huge stockpiling before March 29, when Britain was initially due to leave the European Union.

South Korea’s PMI also signaled contraction, and survey respondents noted slowdowns in the semiconductor and car industries.

Weak demand for new cars is hitting automakers in Japan, Germany and elsewhere, with ripple effects being felt more widely. Italian tiremaker Pirelli last month cut its 2019 revenue growth forecast, saying it was taking a “more cautious view.”

China’s official PMI for May slid to 49.4, and an employment index tumbled to the lowest level since the aftermath of the global financial crisis. The Caixin manufacturing PMI for May released Monday held at 50.2.

WHAT BLOOMBERG’S ECONOMISTS SAY
“This adds to an increasingly challenging picture for Asia, after data last week showed China’s official PMI slipping back into contraction. The upshot: Policy easing is likely to broaden and accelerate. Capital outflows spurred by risk-off sentiment, though, could limit extent of rate cuts by central banks in emerging Asia.”

The latest reading from Germany showed manufacturing in Europe’s largest economy remains in a slump. IHS Markit, which compiles the PMI, said euro-zone factory weakness is “entrenched,” with companies reporting falling demand both at home and abroad.