Tariffs and the Manufacturing Industry: Navigating a Shifting Landscape

Tariffs have dominated manufacturing discussions this year. The introduction of ‘Liberation Day’ has significantly affected the economy, especially impacting U.S. manufacturing. Below is an overview of both the immediate impact on U.S. manufacturing, peripheral costs of these tariffs, and a look into the solutions the industry has implemented to combat these tariffs.

Tariffs and the Direct Impact

At surface level, the biggest impact to manufacturers has been the cost of raw materials. According to National Association of Manufacturers (NAM) Q2 2025 Manufacturers’ Outlook, 66.1% of manufacturers surveyed reported increases in raw materials. According to the Q2 2025 NAM survey, approximately 84.4% of manufacturers are expecting to raise their prices with 41.2% of those respondents expecting to raise their prices by 5% or more. In a separate study, the Institute For Supply Management is expecting raw materials prices to increase 7.5% this year. Despite the effort to raise prices, approximately 57.4% of those surveyed by NAM are expecting dampened business growth.

Peripheral Impacts

With the increase in costs and reduction in bottom line margin, those in the industry are looking to balance these costs by cutting elsewhere in the budget. Most common cuts observed thus far are to capital investment, production, and staffing costs. According to NAM’s survey, 36.4% of manufacturers plan on delaying or cancelling capital investments. While 33.7% noted a reduction in labor costs (pausing hiring or reducing workforce). Additionally, 28.9% noted slowing or shutting down production.

Looking Ahead: Strategic Adaptation Required

As cost pressures mount those at the forefront of the industry, leadership have sought unique solutions to mitigate these challenges. One of which was noted by an April 3, 2025, article published by NAM, in which a wire manufacturer ordered and received two months’ worth of copper rod in an effort to avoid the incoming tariffs.

The Manufacturers Alliance Mid-Year Tariff Impact Survey polled manufacturers during June to explore the industry response to tariffs. Finding that 50% of respondents were absorbing these costs, 60% were negotiating cost sharing agreements, 70% were passing these costs along through price increases, and 41% were passing costs via surcharges. The survey also noted that only a small fraction (10%) was moving their manufacturing location.

Beyond cost sharing and price increase initiatives, manufacturers have been evaluating all aspects of their supply chain to minimize the impact of these added costs, whether that is through long term price agreements with suppliers, building up inventories of tariff sensitive inventory, or moving supply chain relationships entirely.

Key Takeaways

Tariffs have caused a great deal of uncertainty in the manufacturing industry, as shown by the direct and peripheral implications noted above. Like all industry changes, there is not a one-size-fits-all solution; manufacturers have had to evaluate not only their supply base, but their customer base when implementing solutions to these challenges.

Please reach out to a member of our Manufacturing & Distribution team for more information on the topic outlined above. For more information regarding our Manufacturing & Distribution experience, visit our Manufacturing & Distribution industry page.

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