U.S. Government Tariffs: Technology Will Not Be Enough to Save U.S. Manufacturing from Increasing Costs

Manufacturing was a key element of Donald Trump’s election campaign, with the now President promising to bring a “manufacturing renaissance” to the United States, an industry that represents 10% of the U.S. Gross Domestic Product (GDP). Many U.S. manufacturing workers lived in key swing states, increasing the relative value of manufacturing as a topic affecting the outcome of the presidential race. The reciprocal tariffs that were promised on the campaign trail are now coming into full effect, in a far more impactful fashion than was imagined half a year ago. Core manufacturing nations around the world have been hit hard, above the universal 10% tariffs, such as China (34%), Vietnam (46%), Japan (24%), Thailand (36%), and Taiwan (32%). In total, over 180 countries and territories have seen “reciprocal” or universal tariffs imposed on their exports to the United States. These tariffs threaten to upend the modern global supply chains that have supported the manufacturing industry for decades, dragging industrial markets into significant uncertainty and threatening widespread manufacturing challenges.

The challenges of inflationary pressure faced by the Biden administration, the specter of which is still very real in the U.S. economy, is highly likely to rear its head again. The presence of the tariffs on key suppliers of inputs for U.S. manufacturing will drive up costs, as many U.S. companies source materials, feedstock, and components from foreign markets, especially China. Despite the goal being to relocate production of these inputs back into the United States, this is not exactly an overnight process, and in many cases, requires years of plant construction, alongside process design and optimization, even if the investment in the new production does come. The higher costs of manufacturing will not be swallowed by manufacturers, but instead passed onto consumers, driving inflation and thereby curtailing consumer spending, hurting U.S. manufacturers even further. This will inevitably be compounded by retaliatory tariffs from affected nations, dampening foreign demand for U.S. exports, beyond the already political-driven boycotts of U.S. manufactured products from close allies, as seen in Canada. The U.S. domestic market will be highly unlikely to make up for this shortfall in demand.

A primary goal of the tariffs was also to bring back manufacturing jobs to the U.S. market; however, it is unlikely that the U.S. labor market will be able to absorb the increased jobs in its current state and, in fact, compounds an existing challenge already faced by U.S. manufacturers—a lack of skilled manufacturing labor and unfilled manufacturing jobs, with the United States having 482,000 manufacturing job openings in February 2025. The industry faces a low manufacturing unemployment rate, currently at 3.1% (March 2025), and while this an improvement on the low point of 1.8% back in December 2022, a sharp jump in production output will likely push the manufacturing labor market back down toward unsustainably low unemployment rates, resulting in increasing wage costs for manufacturers and further inflation for consumers.

One way out of the input and labor cost hole for U.S. manufacturers would be to double down on investment in technology, with a core focus on automation and robotics solutions to improve production efficiency, and thereby reduce unit costs. In a way, this would represent a highly positive outcome for the U.S. manufacturing industry, improving the country’s digital maturity and Industry 4.0 positioning. Impactful and modular software solutions that can be rapidly deployed will likely see an increase in demand as production scales up, such as Manufacturing Execution System (MES) software. Digital work instructions and supporting Generative Artificial Intelligence (Gen AI) copilots will be highly valuable features as manufacturers look to onboard increasing numbers of workers who will need training and support. However, the situation is unlikely to be as rosy as described, and industrial technology vendors should not expect a buying spree from U.S. manufacturers. Cost-cutting will be the name of the game, and large investments in new technologies might well be the last thing on the minds of many companies. Interestingly, this could be the time to shine for Software-as-a-Service (SaaS) providers, with the Operational Expenditure (OPEX) cost being easier to accept than large Capital Expenditure (CAPEX)-based deployments.

While the United States could see a long-term increase in manufacturing output across the board and growth in the number of available manufacturing jobs as the relative costs of domestic manufacturing falls, in reality, even if manufacturing returns significantly to the United States, assuming the tariffs hold long enough to drive this effect, the cost of production will simply be higher than what current supply chains can offer. Even with the implementation of Industry 4.0 manufacturing technologies, it is unrealistic to expect U.S. manufacturers to achieve even a semi-competitive standing against the majority of production processes in cheaper labor markets such as Mexico, Thailand, and Vietnam. The only manufacturing vertical that these tariffs are likely to positively impact is semiconductor manufacturing, assuming U.S. production can still ensure a cost-effective supply of specialty chemicals, gases, and raw materials required for production, with the high value-added production processes aligning more effectively with U.S. labor costs and skillsets. This is the industry that, so far, has seen the most notable commitment to reshored production, actually started during the Biden administration with the CHIPS and Science Act.

In sum, the U.S. Government tariffs represent more of a political statement by the current administration, rather than an effective policy to drive comprehensive and valuable growth in the U.S. manufacturing market. It remains unclear whether the tariffs are intended to be utilized as a long-term structural policy or as a bargaining tool to win concessions from foreign governments, a tactic that the Trump administration has attempted to use before.

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