Tariff Implications for Manufacturing: Assessment of Benefits and Obstacles

Revamped Article:

President Donald Trump's new tariffs, potentially reaching up to 49% for some countries, are poised to shake up the manufacturing landscape, compelling many producers to seek fresh supply sources and opening up enticing opportunities for businesses already established within the U.S. As the dust settles, here's what we can expect:

Prices will elevate for manufacturers dependent on foreign suppliers, especially for key components.
Continued labor shortages, notably for skilled positions, will persist.
Effective management principles will be more crucial than ever, albeit they won't cover all the changes.
Technology may offer some relief, although it won't be the silver bullet solution.

Our editors at IndustryWeek explore these issues in depth below.

Laura Putre:

Leaders: Establish a "virtual war room" with key decision-makers from supply chain, manufacturing, and other relevant sectors to strategize in response to evolving developments. Liaise with suppliers, jointly assessing absorbable costs and those that necessitate consumer price adjustments. Seek out opportunities to diversify your supply chain both domestically and globally—for instance, sourcing multiple locations for a specific component instead of relying on just one. Pay careful attention to low-hanging fruit where production can be brought back to the U.S. or automated to increase output in case of labor shortages. Stay attuned to trends and problem-solve by being actively involved in industry organizations and engaging in discussions with peers across various industries.

Automotive: S&P analysts predicted, just two weeks ago, a 10% likelihood that tariffs could enter "winter"—meaning they settle in long-term. Well, that 10% appears to be coming true. Now they're saying we should anticipate a reset of the automotive value chain.

The auto industry is a low-margin, high-asset sector. Increased tariffs on steel and aluminum have already been affecting the cost structure of the auto industry. U.S. consumers will see price increases, as they've historically shouldered such burdens.

The average passenger car houses approximately 28,000 parts, many of which are manufactured in low-cost countries. Moving these supply chains back will require finding U.S-based suppliers, constructing new plants, or establishing partnerships with foreign firms (depending on location and regulations), which can take two to three years.

Jill Jusko:

While you may not be able to Six Sigma your way out of a 30% cost increase on Taiwanese microchips, Continuous Improvement (CI) is all about making do with what you have and improving what you've got. Back in April 2020, I wrote that in times of crisis, lean principles tend to shine brightest. Lean thinking equips you to react quickly and solve small problems daily. When the real crisis hits, mental habits and reflexes for reacting and learning from those reactions will be in place, helping you better cope with the fallout.

CI is about fostering a community of problem-solvers, which, in this instance, includes those running your plants and your enterprises. In light of these tariffs, what does this mean for continuous improvement? It means that this would be the wrong time to revert to firefighting as a strategy, no matter how difficult it may seem. Make use of your problem-solvers if you have them, and develop problem-solvers if you don't have them.

Anna Smith:

The recently announced reciprocal tariffs will undoubtedly have substantial effects on supply chain strategies. One of President Trump's objectives is to revitalize American industry, though, despite his claims of significant investments as a result of the new tariffs, the U.S. is unlikely to see significant reshoring in the immediate future. Companies have been cautious about making drastic moves due to the inconsistency of tariffs throughout Trump's second term. Although the new tariffs may provide some clarity regarding the future, widespread countermeasures and concerns over political influence on the tariff numbers make it uncertain that the current tariff percentages will remain constant.

Reshoring is not a simple or swift process. It may take years, or even decades, to manage the logistics of bringing production to the U.S.

There could be some advantages for manufacturers who already source and produce in the U.S. Since they are already ahead of the game, American manufacturers may not need to make as many adjustments to their supply chains.

Ryan Secard:

In terms of an available workforce, there are not many to speak of—unemployment has remained steady between 4-4.2% since May 2024. For a long time, we've been discussing the issue of the "skills gap" in the manufacturing workforce, specifically about the lack of qualified workers available to fill skilled positions, particularly engineers and the like. If these tariffs prove to have some positive impact on manufacturing, they could help ease the skills gap. But in recent years, the "brain drain" has been predominantly in the opposite direction, including during the Covid-19 pandemic.

One aspect I'll be keeping my eye on is unskilled labor. Historically, unskilled labor has been offshored outside the United States. Thanks to inflation with regards to wages and fewer benefits than traditional manufacturing jobs, these are roles that manufacturers have been competing for with fast-food establishments.

Dennis Scimeca:

Reshoring assembly operations offers manufacturers greater control over quality and eliminates shipping costs. Robotics can help circumvent the higher costs of American labor. So, perhaps the tariffs will provide the push for manufacturers to take action that had been advisable all along.

I'm curious to see whether the robots-as-a-service (RaaS) model, where manufacturers gain all the benefits without dealing with the CapEx or maintenance responsibility, will increase in popularity.

In terms of more advanced technologies like AI-based predictive maintenance, connected worker platforms, and Manufacturing Execution Systems (MES), I don’t envision the tariffs having much impact on adoption rates. These technologies are typically adopted on an as-needed basis and tend to be spurred by the recognition of operational challenges at plants. Tariffs don't make those challenges any more pressing than they were already.

Laura Putre: The tariffs may require manufacturers to form alliances with domestic or international suppliers for diversifying their supply chains, especially for key components.
Jill Jusko: Continuous Improvement principles can help manufacturers cope with increased costs due to tariffs by encouraging problem-solving within the organization and fostering a community of problem-solvers.
Dennis Scimeca: Robotics and robotics-as-a-service models could become more popular among manufacturers as a way to offset higher labor costs due to tariffs, providing greater control over quality and eliminating shipping costs.