yes turn it down , if it is a 3000 psi unit you will compromise even more water flow coming out of the wand, if it is turned up to 3000 you should get the 3.5 gpm it is rated for but at 3500 you are more like 2.5 gpm also check to make sure the tips you are using are 3.5 to 4.0 gpm tips they should read 1540, 2540, 4040 ect or 1535, 2535, 4035
Was the reading while the trigger is pulled?
You should get approx 500psi difference between an open gun and closed. Our 8gpm, 3500psi pumps run at 2600psi after 100 ft of hose. Where are you reading the pressure?