Re-Manufacturing is Not Happening in the U.S. and is Down in Other Countries: Tariffs are a Major Factor

     Despite Trump administration declarations to initiate a re-manufacturing revolution in the U.S., the first ten months of the administration have seen a steady and significant drop in manufacturing output. This is according to the monthly Purchasing Manager’s Index (PMI), published monthly by the Institute of Supply Management (ISM), which is used as an economic indicator for manufacturing industry health and output. At the beginning of the year, manufacturing in the U.S. was forecast to increase. I am not sure if that is still the case. The PMI for 2025 is clearly down, but is close to average. A PMI above 50% indicates manufacturing growth, and a PMI below 50% indicates manufacturing decline. Decline has outpaced growth over the past few years. The ISM relies on four demand indicators: new orders, new export orders, backlog of orders, and customer inventories.

     The graphs below are longer-term PMIs for the past year and one for the past three years.

     A March 2025 survey by the National Association of Manufacturers, as reported by Practical Ecommerce, utilizing 250 respondents from the sector, cited trade uncertainties as the number one concern, by a sizeable margin, followed by increasing raw materials costs, increasing healthcare costs, attracting and retaining employees, and a weaker economy.

     Since then, material costs have risen much more for several materials due to tariffs. October was the eighth straight month of manufacturing contraction, indicated by the PMI. Some manufacturers noted that even with high tariffs, in some cases, it is still cheaper to import than to produce domestically. According to Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, as reported by Lucia Mutikani for Reuters:

 "The comments from individual respondents suggest that firms are exhausted by all of the back and forth on tariffs since the beginning of April and are suffering mightily as their customers have pulled back significantly."

     According to ISM’s Susan Spence:

 "For every positive comment about new orders, there were 1.7 comments expressing concern about near-term demand, driven primarily by tariff costs and uncertainty."

     Other economic indicators like consumer spending and business investment, especially in AI infrastructure, suggest that the economy is in decent shape. However, other indicators like record announced job losses suggest otherwise. I believe tariffs are a big factor, both the costs they create and the uncertainty they create. Companies that export products and materials also import products and materials. Most economists say tariffs are a lose-lose for exporting and importing companies, though they can be a win for governments. Others see it as a kind of government extortion. Basically, they amount to extreme taxes.

     Mutikani also noted:

“Tariffs are gumming up supply chains, resulting in longer delivery times to factories. The ISM survey's supplier deliveries index increased to 54.2 from 52.6 in September. A reading above 50 indicates slower deliveries.”  

     The ISM also noted that factory jobs were down and that the significant number of announced investment projects in American manufacturing (over $100 billion) won’t be up and running for several years.  

     According to Jeffry Bartash for Market Watch, recent monthly surveys are also dominated by dissatisfaction with tariffs:

“Business continues to be severely depressed. Profits are down and extreme taxes (tariffs) are being shouldered by all companies in our space,” said one executive at a maker of transportation equipment.

“Steel tariffs are killing us,” another manufacturer told ISM.

“The tariffs are still causing issues with imported goods into the U.S.,” an executive at a chemical maker said. “The inflation issues continue.”

     I have heard similar complaints from oil & gas executives as surveyed by the Federal Reserve Bank of Dallas. Practical Ecommerce gives the mid-July graph below from the Federal Reserve Bank of Philadelphia’s survey showing expected cost increases for inputs, which are higher than average. Most showed slight or modest increases of 0-5%, but there were fewer decreases than big increases above 12.5%

     Mike Crisolago for Money Wise reported on economist Paul Krugman’s comparison of modern tariffs to Denmark’s high value-added tax (VAT), which is essentially a sales tax that pays for some government services. Economists are mixed on the effects of VATs. Denmark’s is very high at 25%, while the global average is 15%. Others say VATs are better for funding the government or reducing government debt than tariffs. Krugman also suggested that the big investments announced for manufacturing in the U.S. were mostly from big companies with high cap-ex capabilities that are more likely to deploy robotics and automation for manufacturing and won’t have a big effect on labor.  

     A PMI report for Japan showed a strong contraction in recent months, indicating a manufacturing decline in countries that are key U.S. trading partners. Low demand in the automotive and semiconductor sectors was cited. They are hoping that the negative impacts of tariffs will fade as new terms are agreed.

      The National Association of Manufacturers (NAM), which has a well-known conservative political stance, has been predictably subdued in any acknowledgement of the negative impacts of tariffs. During the Biden administration and before, NAM focused on the negative impacts of regulations, which they say are higher for manufacturers, as shown in the graphics below. NAM’s bias makes me a bit skeptical. It should be interesting to see if they put out anything showing the positive impacts of regulatory rollbacks. I have not seen anything yet, but it is probably too early to really discern anything, perhaps by a year or more.   

     I believe that when the tariff wars “blow over,” when Trump loses office, or when Congress, or possibly the Judiciary, limits his power, the tariffs will be lowered across the board and the economy will improve, or rather show that it was mostly the tariffs that were causing the problems.

 

    

 

References:

 

US manufacturing mired in weakness as tariff gloom spreads. Lucia Mutikani. Reuters. November 4, 2025. US manufacturing mired in weakness as tariff gloom spreads

Paul Krugman warns tariff ‘chaos’ won’t bring back US manufacturing jobs — and adds Trump’s moves make America look like Denmark. What does that mean? Mike Crisolago. MoneyWise. November 4, 2025. Paul Krugman warns tariff ‘chaos’ won’t bring back US manufacturing jobs — and adds Trump’s moves make America look like Denmark. What does that mean?

‘Business continues to be severely depressed’: U.S. manufacturers blame tariffs. Jeffry Bartash. MarketWatch. November 3, 2025. ‘Business continues to be severely depressed’: U.S. manufacturers blame tariffs.

Japan's factory activity falls at fastest pace in 19 months, PMI shows. Reuters. November 3, 2025. Japan's factory activity falls at fastest pace in 19 months, PMI shows

US manufacturing dips despite improved demand: PMI: Production deteriorated after expanding in September as tariffs and policy uncertainty continue to raise concerns and weigh on manufacturers across industries. Nathan Owens. Supply Chain Dive. November 3, 2025. US manufacturing dips despite improved demand: PMI | Supply Chain Dive

Facts About Manufacturing: The Top 18 Facts You Need to Know. U.S. Manufacturing. National Association of Manufacturers.  Facts About Manufacturing - NAM

United States ISM Manufacturing PMI. Trading Economics. United States ISM Manufacturing PMI

Institute for Supply Management: Analysis by Susan Spence, MBA, Chair of the Institute for Supply Management, Manufacturing Business Survey Committee. boo202510pmi.pdf

What Is the Purchasing Managers Index (PMI)? The Investopedia Team. Updated July 10, 2025Reviewed by Robert C. Kelly. Fact checked by Katrina Munichiello. Investopedia. What Is the Purchasing Managers Index (PMI)?

Charts: U.S. Manufacturing Trends Q3 2025. Adel Boukarroum. Practical Ecommerce. July 31, 2025. Charts: U.S. Manufacturing Trends Q3 2025 - Practical Ecommerce

The Cost of Federal Regulations. National Association of Manufacturers (NAM). The Cost of Federal Regulations - NAM