US manufacturers are stuck in a rut despite subsidies from Biden and
protection from Trump
[July 14, 2025] By
PAUL WISEMAN
WASHINGTON (AP) — Democrats and Republicans don’t agree on much, but
they share a conviction that the government should help American
manufacturers, one way or another.
Democratic President Joe Biden handed out subsidies to chipmakers and
electric vehicle manufacturers. Republican President Donald Trump is
building a wall of import taxes — tariffs — around the U.S. economy to
protect domestic industry from foreign competition.
Yet American manufacturing has been stuck in a rut for nearly three
years. And it remains to be seen whether the trend will reverse itself.
The U.S. Labor Department reports that American factories shed 7,000
jobs in June for the second month in a row. Manufacturing employment is
on track to drop for the third straight year.
The Institute for Supply Management, an association of purchasing
managers, reported that manufacturing activity in the United States
shrank in June for the fourth straight month. In fact, U.S. factories
have been in decline for 30 of the 32 months since October 2022,
according to ISM.
“The past three years have been a real slog for manufacturing,’’ said
Eric Hagopian, CEO of Pilot Precision Products, a maker of industrial
cutting tools in South Deerfield, Massachusetts. “We didn’t get
destroyed like we did in the recession of 2008. But we’ve been in this
stagnant, sort of stationary environment.’’
Big economic factors contributed to the slowdown: A surge in inflation,
arising from the unexpectedly strong economic recovery from COVID-19,
raised factory expenses and prompted the Federal Reserve to raise
interest rates 11 times in 2022 and 2023. The higher borrowing costs
added to the strain.
Government policy was meant to help.
Biden’s tax incentives for semiconductor and clean energy production
triggered a factory-building boom – investment in manufacturing
facilities more than tripled from April 2021 through October 2024 – that
seemed to herald a coming surge in factory production and hiring.
Eventually anyway.
But the factory investment spree has faded as the incoming Trump
administration launched trade wars and, working with Congress, ended
Biden’s subsidies for green energy. Now, predicts Mark Zandi, chief
economist at Moody’s Analytics, “manufacturing production will continue
to flatline.”
“If production is flat, that suggests manufacturing employment will
continue to slide,” Zandi said. “Manufacturing is likely to suffer a
recession in the coming year.’’
Meanwhile, Trump is attempting to protect U.S. manufacturers — and to
coax factories to relocate and produce in America — by imposing tariffs
on goods made overseas. He slapped 50% taxes on steel and aluminum, 25%
on autos and auto parts, 10% on many other imports.
In some ways, Trump’s tariffs can give U.S. factories an edge. Chris
Zuzick, vice president at Waukesha Metal Products, said the Sussex,
Wisconsin-based manufacturer is facing stiff competition for a big
contract in Texas. A foreign company offers much lower prices. But “when
you throw the tariff on, it gets us closer,’’ Zuzick said. “So that’s
definitely a situation where it’s beneficial.’’
But American factories import and use foreign products, too – machinery,
chemicals, raw materials like steel and aluminum. Taxing those inputs
can drive up costs and make U.S producers less competitive in world
markets.
Consider steel. Trump’s tariffs don’t just make imported steel more
expensive. By putting the foreign competition at a disadvantage, the
tariffs allow U.S. steelmakers to raise prices – and they have.
U.S.-made steel was priced at $960 per metric ton as of June 23, more
than double the world export price of $440 per ton, according to
industry monitor SteelBenchmarker.
In fact, U.S. steel prices are so high that Pilot Precision Products has
continued to buy the steel it needs from suppliers in Austria and France
— and pay Trump’s tariff.
[to top of second column] |
President Donald Trump talks to workers as he tours U.S. Steel
Corporation's Mon Valley Works-Irvin plant, Friday, May 30, 2025, in
West Mifflin, Pa. (AP Photo/Julia Demaree Nikhinson, File)
 Trump has also created considerable
uncertainty by repeatedly tweaking and rescheduling his tariffs.
Just before new import taxes were set to take effect on dozens of
countries on July 9, for example, the president pushed the deadline
back to Aug. 1 to allow more time for negotiation with U.S. trading
partners.
The flipflops have left factories, suppliers and
customers bewildered about where things stand. Manufacturers voiced
their complaints in the ISM survey: “Customers do not want to make
commitments in the wake of massive tariff uncertainty,’’ a
fabricated metal products company said.
“Tariffs continue to cause confusion and uncertainty for long-term
procurement decisions,’’ added a computer and electronics firm. “The
situation remains too volatile to firmly put such plans into
place.’’
Some may argue that things aren’t necessarily bad for U.S.
manufacturing; they’ve just returned to normal after a
pandemic-related bust and boom.
Factories slashed nearly 1.4 million jobs in March and April 2020
when COVID-19 forced many businesses to shut down and Americans to
stay home. Then a funny thing happened: American consumers, cooped
up and flush with COVID relief checks from the government, went on a
spending spree, snapping up manufactured goods like air fryers,
patio furniture and exercise machines.
Suddenly, factories were scrambling to keep up. They brought back
the workers they laid off – and then some. Factories added 379,000
jobs in 2021 — the most since 1994 — and then tacked on another
357,000 in 2022.
But in 2023, factory hiring stopped growing and began backtracking
as the economy returned to something closer to the pre-pandemic
normal.
In the end, it was a wash. Factory payrolls last month came to 12.75
million, almost exactly where they stood in February 2020 (12.74
million) just before COVID slammed the economy.
“It’s a long, strange trip to get back to where we started,’’ said
Jared Bernstein, chair of Biden’s White House Council of Economic
Advisers.
Zuzick at Waukesha Metal Products said that it will take time to see
if Trump’s tariffs succeed in bringing factories back to America.
“The fact is that manufacturing doesn’t turn on a dime,’’ he said.
“It takes time to switch gears.’’
Hagopian at Pilot Precision is hopeful that tax breaks in Trump’s
One Big Beautiful Bill will help American manufacturing regain
momentum.
“There may be light at the end of the tunnel that may not be a
locomotive bearing down,’’ he said.
For now, manufacturers are likely to delay big decisions on
investing or bringing on new workers until they see where Trump’s
tariffs settle and what impact they have on the economy, said Ned
Hill, professor emeritus in economic development at Ohio State
University.
“With all this uncertainty about what the rest of the year is going
to look like,’’ he said, “there’s a hesitancy to hire people just to
lay them off in the near future.’’
“Everyone,'' said Zuzick at Waukesha Metal Products, ”is kind of
just waiting for the new normal.’’
All contents © copyright 2025 Associated Press. All rights reserved |
