A Trade Policy to Boost U.S. Manufacturing
The new tariffs imposed last year have thrown a wrench in the gears of U.S. manufacturing (as discussed in Parts 1, 2, 3, and 4). More than half of all imported goods are raw materials, parts and components, and capital equipment used by U.S. manufacturers to produce “Made in America” goods, so it’s no surprise these new taxes have hurt U.S. manufacturers—including in the following ways:
- Higher Costs for Business: Goldman Sachs estimates that manufacturers and other businesses were “eating” 64% of tariff costs in June, but the share being passed on to consumers has now risen to more than 50%. In any event, these new costs mean reduced resources for manufacturers to raise wages or invest in new equipment and R&D.
- Reduced Competitiveness for Exporters: The burden of tariffs means that U.S. manufacturers—whose exports topped $1.6 trillion last year—will find their higher cost structure makes it harder for their products to compete in foreign markets.
- Negative Productivity Shock: Minneapolis Fed economists write that tariffs and trade wars act like an interest rate hike, lowering demand for capital investment. This bodes ill because, in the long term, productivity is the key to industrial competitiveness.
- Small Businesses Suffer: In an October Wall Street Journal/Vistage survey, 51% of small businesses (including many manufacturers) reported that tariffs are decreasing their profitability while just 5% say tariffs benefit them.
It’s plain that tariffs have not been helping most U.S. manufacturers, and 2025 saw declining manufacturing construction, which bodes ill for near-term expansion of the sector. The administration’s laudable pro-manufacturing tax and regulatory reforms will be undermined by ongoing tariffs that make inputs more expensive, exports less competitive, and productivity more elusive.
To correct course, the Chamber has urged the administration to grant exclusions for small businesses, for products not readily available from domestic sources, and in instances where tariffs threaten American jobs. Additional common-sense steps the administration could pursue include:
-
Restore the country exceptions and tariff-rate quotas for imports of steel and aluminum such as those established for Canada and Mexico in 2019;
-
Restore the product exemptions for steel and aluminum established in the Trump administration’s first term—and create an improved process for firms to seek new ones;
-
End the flawed “inclusion” process, where new products become subject to high tariffs with little visibility or effort to assess the potential harm to U.S. industry or consumers;
- Terminate the novel tariffs imposed on Canada, Mexico, and other U.S. free-trade agreement partners;
- Pursue new market-opening trade agreements—on the basis of zero-for-zero tariff reciprocity—so that U.S. manufacturers can sell their products more readily around the globe.
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, grow, and manufacture. The right trade policies will help American manufacturers and make the United States more prosperous—let’s get to work.
DIG DEEPER: More on tariffs
PART 1: How Tariffs Risk Hollowing Out American Manufacturing
PART 2: How Tariffs Risk Hollowing Out American Manufacturing
PART 3: How Tariffs Risk Hollowing Out American Manufacturing
PART 4: How Tariffs Risk Hollowing Out American Manufacturing
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.
