“The economy suffers from high inflation, high unemployment, an energy crisis, a declining dollar, high government spending, and jobs going overseas because of deindustrialization that had been accelerating since World War II.” That sounds somewhat reminiscent of a description of the U.S. economy over the past year. But it isn’t. Instead, those were the words used to reflect the underlying assumptions behind President Jimmy Carter’s now-famous “Malaise speech” of July 15, 1979, more accurately described as the “crisis of confidence” address.
I raise the issue because that seems to be what we’re facing now, a crisis of confidence built up over time: first with the pandemic’s impact on employment and supply chains, then energy security concerns stemming from conflicts in Ukraine and the Middle East, the imposition and threatening by this administration of tariffs across the board, and, hanging over all our heads, the rapid advent of AI, digitalization, and geopolitical uncertainty.
The Conference Board’s Consumer Confidence Index clearly reflects this (its Expectations Index recently registered 69, well below the threshold of 80 associated with predictions of a recession). So does the ISM Purchasing Manager Index: since January 2025, when it climbed into expansion territory for the first time since March 2024 and only the second time since October 2022, it has fallen back into contraction territory.
While it’s true President Trump has placed temporary halts on several of his most controversial tariff policies (most notably with Canada and Mexico), manufacturers have been spooked by tariffs on China and several Section 232 initiatives (e.g., steel, aluminum, autos, copper, timber, and critical minerals). Donald Rumsfeld once observed that there are “known knowns” (the things we know we know), there are “known unknowns” (the things we know we don’t know), and there are “unknown unknowns” (the things we don’t know we don’t know).
The ifs and whens and whats of this administration’s tariff decisions over the past half year place these policies in the latter camp. As a consequence, a recent Manufacturers Alliance mid-year tariffs impact survey shows that nearly 90% of respondents were very or moderately concerned, and two-thirds of respondents report a significant or moderately negative impact on their ability to make long-term investment and sourcing decisions. Indeed, three-fourths of respondents said tariff management is pulling teams away from core priorities, and one-third actually said they’ve already made their companies less competitive.
At this point, U.S. manufacturers have a foot in purgatory due to the unknown future of tariffs, and a foot in paradise due to Congress’s recent extension of the tax breaks in the 2017 Tax and Jobs Act and a new provision allowing for enhanced expensing for manufacturers expanding their operations or investing in R&D. We must now wait and see when the other shoe will drop – and what it will mean for manufacturers over the remainder of 2026.
(Updated 7/7/25)
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