U.S. factory activity fell in August, contracting for the first time in three years and providing the latest sign that a global manufacturing pullback is weighing on the American economy amid rising trade tensions.

New factory orders, employment and production all declined last month from July, according to Tuesday’s Institute for Supply Management manufacturing indexes, which are based on a monthly survey of purchasing and supply executives across the U.S.

The institute’s index of overall activity fell to 49.1 in August from 51.2 in the prior month. Readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 are a sign of contraction.

The latest overall-activity reading marked the first contraction since August 2016 and was the lowest since January 2016, when it was 48.

Trade remains “the most significant issue” for those surveyed, said Timothy Fiore, chairman of the ISM’s Manufacturing Business Survey Committee.

“Respondents continued to note supply chain adjustments as a result of moving manufacturing from China,” he added.

The manufacturing numbers cover August, a month in which President Trump and China announced new tariffs on billions of dollars of consumer goods, which went into effect on Sunday, escalating the trade conflict.