After Donald Trump was elected president, Craig Souser was preparing for a surge in business for his Pennsylvania-based manufacturing company, which makes robotics systems used in food packaging. Instead, he’s now facing higher costs and falling demand that have caused him to delay investments in his business —and look at adding manufacturing outside the United States.
“It’s been the most bizarre roller-coaster ride, where our enthusiasm going into this year was sky high, and then it was just like the air came out of the balloon,” said Souser, CEO of JLS, which his family started 70 years ago. “Nobody saw the magnitude of this coming. I don’t know if it was his plan or not, who knows, but it took what we thought was going to be a rebound year and made it really bad. We have some business but it’s nowhere near what we expected. And we’re not alone.”
It’s an experience that cuts against one of the stated goals of Trump’s policies: Since taking office, Trump has imposed a range of tariffs on imports that’s he’s said will revive American manufacturing by protecting businesses from cheaper overseas competition and incentivizing companies to move their production to the U.S.
Yet, while some companies, including in the pharmaceutical and auto industries, have announced plans to expand manufacturing in the U.S. following Trump’s tariff announcements, others already making their products in the U.S. say they aren’t feeling a benefit from the tariffs. Instead, the tariffs have led to higher import costs for the materials and machinery they need to make their products in America, as well as falling demand from customers and a climate of uncertainty that have made it difficult to invest in expanding their U.S. operations.
Since Trump’s tariffs went into effect, manufacturing activity has declined to its lowest point in five months amid higher costs, falling revenue and a decline in exports, according to an April survey of manufacturers by the Institute for Supply Management. Separate surveys by the Federal Reserve also showed a manufacturing decline in several regions in April, and the Bureau of Labor Statistics found the manufacturing industry as a whole cut around 1,000 jobs last month, amid overall job growth.
“We’re headed in the wrong direction,” said Tim Fiore, chair of the ISM’s manufacturing business survey committee. “When revenue starts to decline, you can’t pay your payroll. You can’t pay your suppliers. You start releasing people, you start cutting back. You start watching your dollars.”
He said his survey found export orders had fallen to an “alarming” level in April, similar to numbers seen during the Great Recession nearly 20 years ago. Around half of companies surveyed by the ISM said they had faced higher costs in the previous month, compared to just 14% who reported cost increases at the end of last year.
“You would expect prices to go up as demand goes up, but demand has not gone up,” Fiore said. “So here we have demand collapsing and we have prices growing. This is almost like the impossible equation.”
Last month, Trump placed a minimum tariff of 10% on nearly all goods coming into the U.S. and a tariff of more than 145% on goods coming from China, with the exception of electronics that have a lower tariff rate of 25%. He has also placed a 25% tariff on imported steel, aluminum, cars and auto parts.
For Souser’s food packaging company, he says the tariffs have made it harder to stay competitive. The key robotics equipment he needs to make his machines at his York, Pennsylvania, facility are made in Europe, and companies like his now have to pay a 10% tariff to import European products into the U.S. Souser said he has no choice but to pass that cost along to his customers in the form of higher prices.
Scott Livingston, CEO of Horst Engineering in East Hartford, Connecticut, said he’s also seen a spike in costs for the materials he uses to make parts and components for the aerospace and defense industries that use steel, aluminum, cobalt, nickel and titanium from around the world.
He said he doesn’t have the ability to pass along those higher costs to his customers, which include major aerospace companies, because of the long-term nature of the contracts he has with them. That means the higher costs will cut into his bottom line.
“I do think that there is some good that will come to existing U.S. manufacturers. However, if I cannot build the capacity because my input costs are now going up, what have we gained?” Livingston said.
Along with the higher cost of importing components and materials used in made-in-America products, companies are also facing higher costs to import the machinery and tools they need. Livingston just purchased several machines from a company in Japan and was planning to put in another order later this year, which he is now anticipating will cost more if Trump’s tariffs remain in place. He said he isn’t able to find that type of highly specialized equipment from a U.S. company.
Companies have put in more than 1,000 requests for exemptions from tariffs on manufacturing equipment they say they need from China in order to build their products in the U.S., according to public comments filed with the U.S. trade representative. The requests, which came in before Trump increased the tariffs on China to more than 145% last month, include asks from Tesla and Ford for equipment the companies say is needed to manufacture electric vehicles in the U.S.
Positive shifts
Some companies, though, said they are optimistic Trump’s tariffs will drive more U.S. customers to buy their products to avoid paying tariffs on imports.
Drew Greenblatt, president of Baltimore-based Marlin Steel Wire, which makes wire baskets used primarily by medical device, aerospace and food processing clients, said he just got an order for five tractor trailers of product from a client that used to buy from a foreign competitor.
“Because of these tariffs, they came to us,” he said. “That’s five tractor trailers of steel I’m gonna buy from my steel mill in Tennessee. So they’re enthusiastic about this. I had to order all kinds of boxes from my local box company. I had to order all kinds of pallets for my local pallet company, and my employees are going to be working overtime trying to keep up with this.”
Greenblatt said Trump’s 25% tariff on steel imports has increased the cost of his steel, even though he buys from a U.S. steel mill, because of higher demand that steel mill is now seeing. Steel prices industrywide have jumped since Trump announced his tariffs.
Still, he sees the benefits outweighing the higher costs.
With the growth Greenblatt’s expecting from tariffs, he’s also investing in new equipment that he buys from companies in Illinois and Indiana, and he’s looking to hire 10 people with a starting wage of around $25 per hour. He is hopeful that he could double the size of his business to more than 200 employees, if Trump is able to make deals with other countries that would reduce the tariff those countries charge on his products.
“We’re just asking for equal. If it’s equal, we’ll thrive, we’ll prosper because we’re so innovative, we’re so clever, we have such great technology, we have such great talent,” Greenblatt said. “But we’re hamstrung because the other guys cheat.”
Other companies, though, said they are seeing weaker demand as a result of the uncertainty the tariffs have created for their clients. Souser said he’s seen orders for his products grind to a halt from the bakeries and other food companies to which he sells his equipment, as some of them are also seeing higher costs as a result of the tariffs.
The tariffs have caused him to pause some of his own investments in his company, and he is now looking at manufacturing some of his robotic systems in Italy, rather than in Pennsylvania, for his customers in Europe.
Even for companies poised to see a boost in their sales from tariffs, the shifting policy of the Trump administration in the first several months has made it impossible for some businesses to make long-term decisions about expanding their U.S. manufacturing, said Scott Paul, president of the Alliance for American Manufacturing, which has generally supported tariffs as a tool to bolster U.S. manufacturing.
“Should I make that decision to open a U.S. facility or to make this investment? For a lot of folks, you can’t answer that until you know with absolute certainty what the policy is going to be,” he said.
Paul said his organization is pushing for other policy moves that could offset some of the negative effect of the current tariffs, like various tax breaks for manufacturers in legislation currently being worked on in Congress.
“We’re very much at a formation stage of all of this. I also think it’s fair to say that it’s also the phase where you have the medicine, but not the sugar,” he said. “You’re in your boat, you’re trying to make it through the storm in a lot of ways, and hope there’s sunshine and calm water and the wind at your back when you get through it.”
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