Trump's tariff chaos threatens his push for rust belt revival
US President
Donald Trump
's signature trade policy is threatening to backfire by upending other top priorities: the revival of
US manufacturing
and the
American Rust Belt
.
In Illinois,
Trump
's tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp.
Rockwell Automation
Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics.
The warnings underscore the rising worry that turbulence from Trump's trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world's two largest economies look to resolve disputes over tariffs and technology.
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In the US, perhaps nowhere is the anxiety higher than in the Midwest, which is still home to the nation's highest concentration of manufacturing employment even after bleeding jobs early this century from the rise of offshoring.
'Overall, it is going to be a drag on the
US economy
,' said Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, calling the tariffs a tax that will raise prices. 'In particular, it's going to be a drag on the Midwestern economy.'
Live Events
Bloomberg
On-again, off-again levies on imported components and machinery — as well as retaliatory duties imposed by other countries — have injected volatility into supply chains, raised costs, hurt exports and chilled investment.
US factory activity contracted for a third straight month in May, and every comment in the Institute for Supply Management's sample of survey responses from manufacturing executives focused on tariffs — including a respondent in the electric equipment, appliance and components business who said the duties have created supply-chain disruptions rivaling those of the pandemic.
The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010 as trade deals and China's entrance into the
World Trade Organization
spurred companies to seek lower-cost labor and production outside the US.
In recent years, though, a cautious optimism had returned. As supply chain shocks from the pandemic pushed companies to bring operations back home, and as Washington offered sweeping incentives for clean energy, EVs and semiconductor production, the Midwest began to stir.
Since the start of 2021, the region has added over 100,000 factory jobs, according to federal data. Rust Belt states had outsized investment in factories in the past decade, according to a report by Citi Institute, even as southern states that offer right-to-work laws, lower labor costs, and aggressive incentive packages to lure global manufacturers have also seen a boom.
The
White House
has pointed to the announcements of big planned investments in the US by companies and foreign governments as proof the president's trade policies are working. Case in point: When Trump traveled to the Pittsburgh area late last month to champion a deal between United States Steel Corp. and Nippon Steel Corp., he touted his plans to increase import duties on steel and aluminum to 50% from 25%.
Still, growth in overall US private construction spending on manufacturing has flatlined from the boom seen under the Biden administration.
Bloomberg
How Trump's approach plays out in the long term remains to be seen. For now, however, the constant shifting of his tariff strategy has 'got people spooked,' said Andrew Anagnost, chief executive officer of Autodesk Inc., which sells software used by manufacturers to design factories and improve manufacturing processes.
'The current operating mode is just the death to long-term investment,' Anagnost said. Construction work that was already underway or in the backlog is continuing but the uncertainty 'is stalling future projects.'
Milwaukee-based Rockwell Automation has already seen some investments get delayed because of uncertainty about how tariffs will affect business. The uneasiness is particularly acute in the automotive industry, which is trying to rewire a global supply chain designed for the old economic order, and in other capital-intensive projects for the long term, CEO Blake Moret said.
Snap-on, which provides tools used by automotive mechanics, can manage the impact of tariffs with minimal disruption because it mostly serves US customers with domestically made products, said CEO Nicholas Pinchuk. But while auto shops are still busy and profitable, they're 'confidence poor,' he said, adding that customers of the Kenosha, Wisconsin-based company are wary of economic disruption even if they support Trump politically.
'They're still big Trump fans. This is Trump territory,' he said. 'They believe in where we're going, but they're worried that something's going to happen.'
Even manufacturers that are positioned to gain from tariffs are anxious.
Faribault Mill, one of the last vertically integrated US textile mills in an industry devastated by offshoring, has been getting calls from from retailers looking for a domestic producer, said CEO Ross Widmoyer. But despite a projected fifth straight record sales year at the Minnesota-based maker of blankets, throws and apparel, Widmoyer said he's concerned about weakening economic growth.
'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' said Widmoyer, who is also chairman of the Minnesota Manufacturers' Council.
In Decatur, Illinois, TCCI Manufacturing was completing a $45 million factory revamp just as Trump slapped steep new tariffs on countries around the world. With US duties on China zigzagging between 30% and 145% in just weeks, TCCI decided to shelve the purchase of crucial Chinese-made testing equipment it needs by early next year. The factory makes compressors used in EVs.
The company has evaluated alternative sources for the equipment, but 'the problem with that is we don't know what the tariffs are doing,' TCCI President Richard Demirjian said as the company opened the factory earlier this year.
TCCI still has high hopes for the plant despite the uncertainty around tariffs and moves by congressional Republicans to roll back federal sweeteners for electric-vehicle purchases. The facility is now called the Clean Energy Innovation Hub, evoking the manufacturer's bet on the future. As a symbol of the region's past, Demirjian drove his father's maroon 1927 Model T to the plant's grand re-opening in April.
Illinois Governor JB Pritzker spoke at the ribbon-cutting ceremony and touted the factory as the first to benefit from the state's Reimagining Energy and Vehicles program, which provided part of more than $21 million that TCCI received in state incentives for the project.
But Pritzker, a Democrat widely seen as a potential presidential candidate in 2028, warned that erratic policy-making is undercutting efforts to bolster US manufacturing.
'Tariffs are on, tariffs are off, tariffs are up, tariffs are down,' Pritzker said. 'Imagine trying to run a business and figure out from day to day how you're going to do pricing, who you're going to do business with, based upon where the tariffs are being imposed.'
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