In a recent episode of the Manufacturing Executive podcast, Daniel unpacked the potential implications of the president’s planned tariffs on the industrial economy.
“We can say with confidence that there’s going to be a higher floor – prices are going up here,” explained Daniel, referring to the 25% tariffs slated to hit steel and aluminum imports as well as goods from Mexico and Canada in early March.
But while prices are likely to reset higher, at least in the short term, Daniel pointed out that the pain will be felt differently across the manufacturing supply chain.
“Obviously the primary pain point is going to be firms that are in similar positions to where we are – more the service centers buying directly from the mills and selling to customers… As time goes on, we definitely do see that filtering all the way through and reaching potentially some demand destruction.”
The silver lining? Tariffs could provide a tailwind for reshoring efforts and investment in domestic manufacturing. The US is already a leader in green steelmaking technology, and higher import costs could tip the scales further in favor of stateside production.
But a critical challenge remains: labor availability. Daniel cautioned that abrupt immigration restrictions could constrain the labor supply just as demand for manufacturing workers is poised to grow.
A clear takeaway is that any abrupt policy action really can distort long running trends. Immigration certainly is a risk to the reshoring that we desperately want and need.
Despite the headwinds, Daniel and the FLACK Global Metals team remain cautiously optimistic about the trajectory of US manufacturing. Their recent economic outlook report highlighted that the sector’s share of construction spending is at highs not seen since 2002, and industrial production would be 5% above the 2018 peak if factories were operating at full capacity.
However, one stark warning emerged from the report: manufacturers should prepare for the potential of interest rates above 3% in the coming years. Businesses that are banking on a reversion to the near-zero rates of the post-financial crisis era could be putting themselves at risk.
As the Trump administration sets out to reshape trade policy and the Fed grapples with persistent inflation, only one thing is certain: the road ahead for US manufacturing is paved with both risks and opportunities. Savvy leaders will need to stay nimble, adaptive, and laser-focused on driving productivity to thrive in the face of unrelenting change.
To access FLACK Global Metals’ full economic outlook report, visit their LinkedIn page or reach out to Daniel Doderer directly via email or LinkedIn.
