Tariffs Up, Manufacturing Down: How U.S. Factories Are at Risk

The U.S. Chamber of Commerce has long fought to make the United States the best place in the world to invest, build, hire, innovate, and grow. One key priority is the success of the American manufacturing sector, which boasts the world’s highest productivity and second largest output. 

However, tariffs have thrown a wrench in the gears of U.S. manufacturing. Many of the steepest new tariffs target our factories: 

• Steel and aluminum tariffs (50%) have sent the U.S. price of steel to levels twice as high as other markets, and aluminum prices have soared in lockstep with the tariffs. For every one U.S. worker employed in steel production, there are as many as 80 in downstream manufacturing industries that are harmed by these higher prices (and the ratio is 1-to-177 in aluminum). 

• Copper and lumber tariffs (25%) have added to the already high cost of materials for U.S. manufacturers. Wood is widely used in manufacturing (and homebuilding, another growth priority), and copper is essential to the ongoing electrification of many industry sectors. 

• Auto and auto parts tariffs (25%) have dealt a blow to U.S. auto manufacturing, gobbling up its profits, as explained by Michigan State’s Jason Miller. 

DIG DEEPER: Read the Chamber's work on tariffs

'Made in America'

Why do tariffs hit U.S. manufacturers so hard? The Chamber estimates 56% of all imported goods are raw materials, parts and components, and capital equipment used by U.S. manufacturers to produce “Made in America” goods. Many of these imports simply aren’t available from domestic sources, or if they are, they are not available in sufficient quantities or at reasonable prices.  

The harm to U.S. manufacturing is real: 

• Output and Jobs: According to a report from the Institute for Supply Management, the U.S. manufacturing sector contracted for its eighth consecutive month in October. U.S. factories have shed jobs 42,000 jobs since “Liberation Day” in April, cutting total employment every month through August (latest available), according to data from the Bureau of Labor Statistics.  

• More Losers than Winners: In findings echoed widely, a survey by the Connecticut Business and Industry Association found that 66% of the state’s manufacturers say tariffs affect them negatively, with just 3% saying they benefit. The Dallas Fed reported similar findings among Texas manufacturers in August.  

• Eating the Tariffs: To date, American manufacturers and other businesses have absorbed most of this tax hike, but this is unsustainable. Goldman Sachs economists estimated that U.S. businesses were absorbing about half of all tariff costs as of August. However, they forecast that this will fall to 22% by the end of the year as more than half of the burden is passed on to consumers in the form of higher prices. 

Part 2: How Tariffs Risk Hollowing Out American Manufacturing

The Painful Impact of the Steel and Aluminum Tariffs

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About the author

John G. Murphy

John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.

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