Where We Stand Today: Industry Insights into the Future of Tariffs

• American manufacturing has significantly declined and is now dominated by the service sector, a trend exacerbated by global trade agreements and the COVID-19 pandemic. This new reality highlights the urgent need to revitalize domestic production and establish fair trade practices.
• The U.S. faces substantial trade deficits, particularly in electrical equipment and vehicles, but industry leaders believe advanced manufacturing, fueled by AI and robotics, can significantly enhance global competitiveness.
• Navigating the evolving tariff landscape requires strategic compliance, financial management, and a commitment to continuous improvement, as highlighted by Clevenger’s observation on the effectiveness of cross-functional teams in addressing various aspects of product design and manufacturing.

On May 13, MichAuto Executive Director Glenn Stevens Jr. led a discussion with UHY LLP Partner and Managing Director of UHY Advisors Thomas Alongi and UHY Consulting Principal Charles Clevenger on the current landscape of American manufacturing as it relates to tariffs.

Alongi and Clevenger provided insights on managing the new tariff environment, including investing in technology to enhance productivity, focusing on cost-control measures, and the necessity of building robust relationships with suppliers to mitigate disruption.

Alongi discussed the evolution of American manufacturing, emphasizing the decline in goods-producing employment compared to the growth in the service sector. Regarding the downward spiral in U.S. employment, he said, “Less than 14 million individuals are employed in goods-making industries, even in construction. We have almost 130 million in the service sector, so we have become a service-based economy.”

Events like China’s entry into the World Trade Organization and the creation of NAFTA have contributed to this shift, which has also flattened manufacturing productivity. The COVID-19 pandemic further exposed vulnerabilities in supply chains, leading to renewed interest in revitalizing American manufacturing. To compete globally, it is crucial to establish a level playing field, as unfair tariffs can worsen trade deficits.

According to the Wall Street Journal, the U.S. faces significant trade deficits, including a staggering $264 billion in electrical equipment, a $242 billion gap in vehicles, and $38 billion in iron and steel. With these concerning figures, industry leaders like Alongi emphasize the incredible potential within advanced manufacturing. He confidently stated that we are at a pivotal moment, driven by “the rise of AI, humanoid robotics, and advanced technology.” This transformation marks a turning point for American manufacturing, enhancing our competitiveness in the global market.

Navigating the new tariff landscape requires a strategic approach encompassing compliance, financial management, and continuous improvement. First and foremost, ensuring compliance with the latest regulations and accurately identifying the country of origin using harmonious tariff codes is crucial to avoid costly penalties. Effective financial management is also essential, as tariffs can significantly impact expenses. Maintaining accurate data and leveraging forecasting to anticipate financial implications will help organizations make informed decisions. Finally, fostering a culture of continuous improvement allows companies to adapt swiftly to changing tariffs.

“What we found in industry when we went through the ’18/19 tariffs’ in the first Trump administration was that we were most effective if we formed a cross functional team and we focus not just on the supply chain, but other aspects of the product design and the value stream and manufacturing footprint,” Clevenger said.