Manufacturing in the Tariff Era

U.S. manufacturers are navigating a complex and uncertain landscape shaped by persistent tariff policies and evolving trade relations. A June 2025 Mid-Year Tariff Impact survey by Manufacturers Alliance reveals how companies are adapting their strategies, recalibrating capital plans, and adjusting supply chains to mitigate the impact.

Persistent Concern, Growth Strategies on Hold

While tariff-related anxiety remains widespread, there's a subtle shift in its intensity. Nearly 90% of respondents are "very concerned" or "moderately concerned" about the impact of current U.S. tariff policies, a slight decrease from 95% compared to a similar Manufacturers Alliance survey (available to members only) in April 2025. As one respondent noted, "The constant changes are not just disruptive, they’re exhausting. It’s not the tariffs that are the issue, it’s the volatility."

That volatility remains top of mind. In recent member discussions, manufacturers expressed significant uncertainty about the durability of the new U.S.-China trade agreement, with most respondents either “uncertain, anticipating potential instability” or “not confident it will hold.” This caution is also reflected in their planned responses: the majority are either “still evaluating their approach” or making only “minor adjustments” to supply chains, avoiding rapid reconfiguration. Similarly, few companies are altering sourcing strategies following China’s removal of export restrictions on rare earth minerals. Most plan to maintain a diversified approach that includes China or are taking a wait-and-see stance as they assess longer-term implications. 

Concerns About Tariffs Remain High Despite Small Decrease

Source: Manufacturers Alliance Tariff Surveys, April 2025, June 2025

Hesitation Remains Constant

Tariffs continue to cast a shadow over manufacturers' strategic confidence. In June, 65% of respondents reported a significant or moderate negative impact on their ability to make long-term investment and sourcing decisions, a slight improvement from 70% in April. Approximately 17% described the impact as significant, leading to delays, hesitation, or suspended initiatives. Half of the companies proceeding with capital plans are doing so with revised timelines and increased risk mitigation, while fewer than 3% have paused or canceled major initiatives outright.

73% of manufacturers say tariff management is pulling teams away from core priorities.

Disruption and Competitiveness

Tariff-related activities have significantly impacted operational teams. Nearly three-quarters of respondents indicated their teams have been diverted from core responsibilities. More than 20% reported that this diversion caused delays in other strategic initiatives. As one leader stated, "constant changes makes it difficult to consistently understand and manage the tariff impact. This is also consuming significant management time to understand and manage."

Tariff Effects on Company Competitiveness

Source: Manufacturers Alliance Mid-Year Tariff Impact Survey, June 2025

The impact on global competitiveness is mixed. While 55% of manufacturers reported no change, 35% felt less competitive against international rivals, and 1% described a "significantly less competitive" shift. Conversely, 8% felt tariffs had improved their competitive position.

Adapting to Change with Strategic Flexibility

The June Manufacturers Alliance survey found that manufacturers rated their company’s ability to adapt to tariffs at 3.6 on a scale of 1 to 5, reflecting on the side of confidence but with lingering uncertainty. This concern is similar to findings from consultancy West Monroe's Q2 Supply Chain Poll, where tariffs surged 12 percentage points to become the top concern for 250 U.S. supply chain leaders, overtaking cybersecurity. 

This sense of economic unease is also reflected in broader executive sentiment. According to the Manufacturers Alliance CEO Outlook May 2025 survey, the top concerns in order of importance among manufacturing leaders include:

1. General economic and global market volatility
2. Expected changes in tariffs
3. Commodity and raw material prices
4. Issues specific to China
5. Global supply chain disruptions

While cyber threats and domestic political instability remain on the radar, they’ve been surpassed by persistent worries over trade policy and sourcing risk—underscoring how deeply tariffs and supply challenges are shaping corporate priorities.

West Monroe noted these adjustments are largely defensive and reversible—a “tariff tap dance” strategy—because policy swings can happen overnight. Similarly, in the June Mid-Year Tariff Impact survey, manufacturers reported relying on cost-sharing, supplier negotiation, and internal cost absorption—demonstrating a hybrid of flexibility and restraint. This pattern reflects a broader trend: companies are steadily adapting but rarely restructuring their core supply chains. This aligns with findings from April, where companies also expressed cautious confidence in their mitigation efforts.

Supply Chain and Raw Material Strategies Under Pressure

Manufacturers are employing a mix of tactical agility and long-term planning for supply chain and raw material management. Many are reinforcing supplier relationships and securing locked-in pricing. Some have proactively built inventories of critical inputs, with one company reporting "two years of inventory held for things that require rare earth metals."

But the stakes are rising dramatically. According to AInvest, the U.S. now imposes a layered tariff regime averaging 58.3% on Chinese rare earth exports, escalating supply shocks into national-security concerns. This heightened tension isn’t abstract—Center for Strategic & International Studies reports that in May, Ford paused production of its Explorer SUV at its Chicago Assembly plant for an entire week due to a rare-earth magnet shortage, demonstrating how deeply these supply issues ripple into operations and labor.

Diversification and regional localization are gaining traction, with manufacturers exploring a variety of approaches. Survey respondents shared the following strategies:

• Reevaluating production footprints: “We’re looking at where we manufacture certain products and reshoring where it makes sense.”
• Shifting sourcing away from China: “Considering alternative Southeast Asian sources.”
• Adjusting logistics networks: “We have rerouted our incoming containers and created warehousing in Canada for their use, instead of being a central hub for consignment and distributing from the U.S.”
• Navigating the complexity of reshoring: “Reshoring where possible, which requires some product redesign—an 18- to 24-month process.”
• Investing in automation: Companies reported increased investment in North American automation “to insource a portion of our supply chain.”
• Strengthening inventory strategies: Tactics include increasing safety stock, diversifying suppliers, and extending forecast horizons. As one manufacturer noted, “We’re increasing our forecast horizon with vendors and closely monitoring risk areas.”

77% of manufacturers are passing tariff costs to customers—only 10% are shifting production.

Tactical Response, Not a Structural Shift

Most companies are employing tactical measures to mitigate tariff costs. Results from the June Mid-Year Tariff Impact survey indicate the most common approach (77%) is passing costs to customers via price increases. Other strategies include negotiating cost-sharing with suppliers (60%) and absorbing costs internally (50%). Surcharges are also being used by 41% of respondents. Structural changes, such as relocating manufacturing operations, remain less common, with only 10% undertaking such a shift.

Company Responses to Increased Costs

Source: Manufacturers Alliance Mid-Year Tariff Impact Survey, June 2025

The ripple effects of tariffs extend beyond manufacturers. For instance, Quartz reported that Signify, a parent company of Philips Hue, has announced price increases across its U.S. smart lighting lineup effective July 1, citing tariffs as the direct cause. Some Hue products are already about 10% more expensive in the U.S. than in Europe. Similarly, according to Reuters,  an analysis of Amazon’s platform shows U.S. prices of Chinese-made goods rising 2.6% since January—climbing faster than general inflation.  Most manufacturers are passing tariff costs to customers, making cross-industry price adjustments inevitable. 

Beyond these primary methods, some companies are exploring alternative strategies. These include "shifting production," "moving manufacturing & supply sources to lower tariff countries," and "manufacturing location and product design changes." One respondent mentioned "reducing cost based on which duties are applied; reducing intercompany transactions; using built-up cost; tracking certificates of origin." Another highlighted, "Resourcing to alternate locations, and onshoring in some areas where feasible ROI."

Despite these efforts, large-scale reshoring and regional localization efforts are not yet widespread. While 31% are making significant diversification or domestic supply chain changes, the majority (59%) are primarily monitoring the situation with contingency plans rather than overhauling their networks. Others noted different approaches based on country origin and markets served, minimizing imports, and lobbying.

Still, while most companies continue to respond tactically, broader industrial trends suggest early signs of structural momentum in certain sectors. According to advocacy organization Coalition for a Prosperous America, tariffs—alongside targeted tax incentives—are helping to reduce U.S. reliance on China and driving renewed investment in domestic manufacturing. Sectors such as steel, appliances, EV batteries, semiconductors, and renewable energy equipment are seeing increased reshoring activity. While this resurgence is not yet widespread across all manufacturing, it marks a modest but meaningful shift: U.S. import volumes from China are declining. In a landscape where most firms are cautiously adapting, these developments highlight how some industries are beginning to turn short-term pressure into long-term repositioning.

Strategies to Reduce Tariff Impacts

Source: Manufacturers Alliance Mid-Year Tariff Impact Survey, June 2025

Sub-sector Differences Shape the Pace of Change

While many manufacturers are adjusting their inventory and sourcing strategies, the pace and intensity of these changes vary significantly by sub-sector. Industries most affected by tariffs, including fabricated metal products, machinery, and electrical equipment manufacturing, are leading the way in adopting more proactive approaches. These sub-sectors, which rely heavily on imported metals and components, are more likely to implement locked-in pricing, long-term stockpiling, and diversified sourcing arrangements.

In contrast, sub-sectors with more localized or less tariff-sensitive supply chains, such as chemicals or miscellaneous manufacturing, are reporting fewer adjustments. These companies often depend on stable domestic suppliers and have largely maintained existing inventory practices. Several respondents noted that supply availability has not been a concern, citing steady vendor relationships and limited exposure to tariff-impacted goods.

These differences reflect broader shifts in global supply chain strategy. As highlighted in "How Tariffs Are Reshaping Global Supply Chains in 2025", companies across sectors are accelerating near-shoring efforts and investing in technology to build more agile networks. According to Global Trade, manufacturers most exposed to tariffs are leading this transformation by prioritizing supplier diversification, regional sourcing, and the use of AI enabled visibility tools, which have emerged as top supply chain priorities for 2025.

Ultimately, these patterns underscore how exposure to trade risk is shaping strategy. Sectors under the greatest pressure are evolving more rapidly, while others remain in a monitoring posture. Across the board, manufacturers are reevaluating risk, building flexibility, and preparing for continued policy volatility.

Financial Strain Hits Margins and Markets

The most significant financial impact reported by manufacturers is rising input costs, cited by 86% of respondents, particularly for raw materials like steel and aluminum. Over half (55%) reported increased compliance and legal costs, while 44% cited operational cost increases due to supply chain disruptions. Additional pressures include:

• Decline in sales or market share (34%)
• Reduced cash flow or liquidity due to delayed investments or higher operating costs (27%)
• Negative impact on stock value or investor confidence (21%)

Financial Impacts on Manufacturers

Source: Manufacturers Alliance Mid-Year Tariff Impact Survey, June 2025

These reported pressures align with broader economic indicators. According to RTTNews, the U.S. manufacturing sector continued to contract in June 2025, with the Institute for Supply Management's manufacturing index inching up to 49.0 which is still below the threshold of 50 that indicates growth. While production improved slightly, the index showed a fifth consecutive monthly decline in new orders and a sixth straight month of falling employment, signaling that manufacturers remain in a defensive position. The data suggests ongoing caution in hiring and capital investment, consistent with the strategic hesitation and cost sensitivity reflected in our survey.

Despite these headwinds, some companies are identifying opportunities. One respondent noted “opportunities for margin expansion as a domestic supplier,” while another highlighted “more growth opportunity as manufacturers look to reshore.” These perspectives reflect a potential silver lining for companies able to reposition themselves as regional or lower-risk alternatives in an increasingly tariff-conscious marketplace.

Looking Ahead

A pervasive theme across all responses is uncertainty. Many comments highlighted the difficulty of planning amid rapidly shifting policies. One respondent lamented, "The uncertainty and constant changing of tariffs has caused a lot of disruption and extra work." Another expressed frustration over the "constant changes [that] make it difficult to consistently understand and manage the tariff impact." Yet, some see this as an opportunity for resilience and regional localization.

Despite enduring tariff concerns affecting competitiveness and costs, U.S. manufacturers are evolving through stronger mitigation efforts, supply chain diversification, and regional strategies to manage this ongoing new normal.