The outlook: The Trump administration is betting on sweeping tariffs to bring back US manufacturing jobs. But companies face a host of hurdles, including a challenging macroeconomic backdrop, high startup costs, and talent shortages.

Though the United Auto Workers union hailed the tariffs as a victory, citing the potential to boost production at “underutilized” US auto plants, few manufacturers are as upbeat.

Tariff uncertainties pose challenges: Economists had concerns about slowing growth before the trade moves that deepened once the scale and magnitude of the tariffs became known.

• There are significant unknowns regarding the tariffs, including how long they will last and whether they will be lifted or revised in negotiations, and major US trade partners may retaliate.
• Economists warned of rising risks of a recession amid falling consumer and business confidence. JPMorgan put the odds of a US slowdown this year at 60% after the tariff announcement.

These conditions don’t bode well for businesses that would need to make yearslong commitments to build capital-intensive facilities. The possibility that tariffs could end or that other nations could negotiate more favorable trade terms creates additional risk. Businesses have difficulty justifying such investments when they have low visibility into future costs or demand. Rising anti-American sentiment in some regions could add another potential layer of uncertainty.

Tariffs won’t solve structural talent constraint: About 20.6% of undercapacity US manufacturing plants identified inadequate labor supply and skill as a major impediment, per Q3 2024 Census Bureau data.

Cost disadvantage in US: Snap-on CEO Nicholas Pinchuk recently told CNBC that companies building in the US face a tougher road than players in China that benefit from lower-cost materials and fewer regulations.

He also cited the industry’s unfavorable public image, saying people still think of manufacturing as “dark” and “dirty” work.

Signs of life: One bright spot for US manufacturing has been the 2022 CHIPS and Science Act, which has spurred semiconductor production.

President Donald Trump previously called for the act to be repealed but last week set up a special office to administer its funds—though there are still concerns that some funding under the act could be curtailed.

Our take: Boosting US manufacturing is a noble goal. However, business leaders say the current environment makes longer-term US investments risky, and some are already scaling back. Despite incentives from policies like the CHIPS Act, the broader outlook for reshoring US manufacturing remains uncertain.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Non-clients can click here to get a demo of our full platform and coverage.