President Donald Trump's 10% tariffs on all imports to the United States, rising to as high as 49% for some countries, promise to upend the manufacturing landscape, forcing many producers to look for new suppliers and creating dramatic opportunities for companies that already have their production here.
It's too soon the know all of the impacts, but a few things are clear:
- Costs will go up on manfacturers that rely on foreign suppliers for key components
- Companies will continue facing labor shortages, especially for skilled positions
- Good management principles won't offset all of the changes, but they'll be more important than ever
- And technology could provide some relief, but it's not going to be a cure all
Discussing these topics are InudstryWeek's editors. Below are some written thoughts that each of them had on the topic.
Laura Putre, senior editor covering leadership and the auto industry
Leaders: Set up a “war room” with key leaders from supply chain, manufacturing, etc. to strategize as new developments arise. Communicate with your suppliers. Together you have to figure out the costs you can absorb and the costs that will have to be passed on to the consumer. See if there are places where you can diversify your supply chain globally and domestically—for instance, source three locations for a particular component instead of two. Also look at that low-hanging fruit where you can bring production back to the United States or add automation to increase production if the labor market is tight. Be on top of trends and problem-solving by being active in your industry organizations and talking to others in your industry and those adjacent to it.
Automotive: S&P analysts predicted two weeks ago, 10% chance of a tariff "winter"--where these new tariffs settle in long-term. Well, that 10% looks like it’s coming true. Now they're saying “expect a reset of the automotive value chain.”
The auto industry is a low-margin, high-asset industry. Increased tariffs on steel and aluminum are already hiking costs for the auto industry. U.S. consumers will see increased prices—they bear the brunt of cost increases historically.
A passenger car, on average, has around 28K parts, many manufactured in countries where costs are much lower. Moving those supply chains back means either finding U.S.-based suppliers or constructing new plants, which can take two to three years depending on location, regulations.
Jill Jusko, executive editor in charge of continuous improvement
You can't Six Sigma your way out of 30% cost increases on Taiwanese microchips, but CI is about making do with what you have and improving what you have. Back in April 2020 I wrote that times of crisis may be when lean shines most brightly. I quoted a lean practitioner (Michael Balle) who wrote, “Although lean might seem fragile to crises, because of low inventories, it’s quite the opposite. Lean thinking is about training to solve small crises—problems—daily. When the real tsunami hits, mental habits about reacting and learning from one’s reactions, relationships and coordination reflexes are in place to better deal with outage and its consequences.”
And continuous improvement is about building a community of problem-solvers, in this instance the teams running the plants and enterprises. So, what do these tariffs mean for continuous improvement? It means a lot of things. It means this would be the worst time to fall back to fire-fighting as a strategy, hard as that may be to do. It means make use of those problem-solvers if you have them, and develop them if you don't have them.
Anna Smith, news and supply chain editor
The newly announced reciprocal tariffs will undoubtedly have massive effects on supply chain strategies. One of Trump’s goals is to revive American industry, but despite his claims of large investments due to the new tariffs, the U.S. is unlikely to see significant reshoring in the near term. Companies have been hesitant to make any drastic moves due to the on-again, off-again nature of tariffs so far into Trump’s second term, and even though the new tariffs may provide a clearer view of what is to come, widespread counter measures and Trump’s plan to use the tariffs for political influence doesn’t inspire confidence that the current tariff numbers will stick.
In addition, reshoring isn’t a process that happens at the drop of a hat. It can 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 have to make as many adjustments to their supply chains.
Ryan Secard, work force and talent editor
In terms of unemployed people to draw from, there are not that many — unemployment has hovered between 4-4.2% since May 2024. In the manufacturing workforce, we’ve been talking about the issue of the “skills gap” for a long time, maybe 30 years, specifically about how there are not enough qualified workers available to take skilled jobs, especially engineers and the like. If these tariffs can give manufacturing some kind of boon sufficient sort of poach skilled workers from tech companies, then perhaps these tariffs could help that. But in recent years, that “brain drain” has mostly gone in reverse, including during the Covid-19 pandemic.
One thing I’m going to keep my eye on is unskilled labor. Traditionally, that’s been offshored from the United States, and thanks to inflation with regards to wages and fewer benefits than traditional manufacturing jobs, these are jobs that manufacturers have found themselves increasingly competing for with fast food places.
Dennis Scimeca, senior technology editor
Reshoring assembly operations gives manufacturers more control over quality and eliminates shipping costs. Robotics can sidestep the higher costs of American labor. So, perhaps the tariffs will provide the final kick for manufacturers to do something that was advisable, anyway.
I wonder whether the robots-as-a-service (RaaS) model, where manufacturers get all the benefits while skipping the CapEx and responsibility for maintenance, will increase in popularity.
In terms of more advanced technologies like AI-based predictive maintenance, connected worker and MES, I don’t see the tariffs having much effect on adoption rates. These are as-needed deployments, spurred by recognizing operational challenges at plants. Tariffs don’t make those problems any more pressing than they already were.
