New report warns tariff risks may cost the US $490B in manufacturing
A recent Joint Economic Committee report warns that continued tariff uncertainty could lead to more than $490 billion in lost US manufacturing investment by 2029. The analysis, issued by Democratic members of the committee, forecasts a 13 percent annual decline in capital investment if trade policy remains unpredictable. The figure draws comparisons to the investment drag caused by Brexit-era volatility.
This is not a theoretical risk. Both small and large manufacturers have begun postponing major capital spending. The concern is not just the cost of tariffs, but the unpredictability of when and how they are applied. This instability is disrupting long-term planning across the sector.
The projected decline threatens to reverse more than a decade of progress in manufacturing growth across key industrial regions. The impact extends beyond delayed equipment purchases, it signals a potential shift in the long-term strategy for American production.
Small manufacturers are feeling the pressure first
Small businesses, especially those with fewer than 10 employees, are already facing measurable impacts. Employment in this segment has fallen by 3 percent since early 2024, totaling over 366,000 lost jobs. This trend coincides with rising input costs, particularly in energy and raw materials, which are sensitive to global trade conditions.
Roughly 30 percent of small business owners expect to raise prices in the coming months, the highest level recorded in over a year. Meanwhile, five Federal Reserve districts have reported weakened manufacturing activity, citing delayed orders, fewer new hires, and lower confidence in future demand.
Small firms are less equipped to absorb tariff-related cost increases. Without the financial reserves or supply chain leverage that larger corporations enjoy, many are scaling back investment or delaying key upgrades. The uncertainty is forcing some to walk away from growth opportunities altogether.
Executive hesitation reveals deep-rooted policy fears
A recent survey of manufacturing executives found that 94 percent are deferring capital expenditures, citing policy uncertainty as the primary reason. Nearly 90 percent identified tariff unpredictability as the top barrier to investment.
There is also waning confidence in nearshoring as a risk management strategy. Tariffs have increasingly affected not just rival economies but allied nations as well. Geographic proximity no longer ensures supply chain reliability, which complicates long-term decisions about where to locate production.
As a result, manufacturers are rethinking their five-year plans. Some are investing in analytics and automation to hedge against disruption, while others are freezing spending altogether until trade signals become clearer.
While reshoring and automation have gained support among policymakers, they are not immune to the effects of volatile trade policy. Reshoring requires significant capital, long timelines, and stable conditions, none of which are guaranteed.
Adoption of automation and AI is rising in high-tech manufacturing, but these solutions cannot replace the need for predictable supply chains. Critical components still cross borders, and tariffs continue to affect costs, lead times, and supplier relationships.
Redundant supply chains may offer resilience, but they come with added complexity and higher operating costs. For sectors already managing tight margins, that tradeoff is proving difficult to justify.
Manufacturers are now adapting in real time. Some are adding tariff clauses to supplier contracts, shifting sourcing strategies, and engaging with policymakers to seek clearer guidance. Others are using predictive analytics to model disruption risks and explore diversified supplier bases. Despite these adjustments, a broader strategic framework remains absent. The lack of clear direction from federal trade policy is keeping companies in a holding pattern.