This article is part of the Inside Year One: Key Developments Under a New Administration. Click here to read the full newsletter.
The year 2025 began with optimism for the manufacturing sector, with hopes for tax relief, deregulation, and a generally probusiness environment under the second Trump administration. We captured some of this optimism in our Manufacturing Moment podcast series, featuring leaders of federal and state trade associations. The results have been decidedly mixed.
The sector’s hopes for a stable business climate were toppled in April when President Trump began trade wars with all significant U.S. trading partners simultaneously, imposing unprecedented tariffs under the International Emergency Economic Powers Act (IEEPA), a little-used statute conferring some of Congress’ intrinsic and exclusive trade authority on the President. These tariffs triggered hurried negotiations with many nations, resulting in dizzying on-the-fly changes that have frustrated companies trying to mitigate the impact on supply chains and cost structures. High-level accords with countries have been very slow to granularize, leaving manufacturers to cope with an ever-evolving, or devolving, landscape. Moreover, early in 2026 the Supreme Court is expected to render a final decision whether the IEEPA tariffs were within the President’s power or are invalid. If those tariffs are struck down, we can expect further disruption, even to the bilateral trade agreements that were negotiated under threat of those tariffs.
There have been some wins. In July, the Administration delivered on tax relief critical to manufacturing. The OBBBA made permanent several key tax benefits for the sector that were adopted in 2017 as temporary measures. These include immediate deductions for R&D spending and factory capital spending, and provisions supporting small and family-owned businesses related to pass-through and estate exemptions. The Administration has relaxed or simply waived a number of environmental regulations, from narrow rules affecting a handful of facilities to broad efforts to eliminate addressing climate change or fossil fuel pollution. Many of these actions are subject to ongoing legal challenges but remain in effect.
The Administration has also taken a number of steps within its power to speed federal permits and approvals of all types, but hopes for broader permit reform legislation were dashed when the Administration acted to revoke approvals already issued to offshore wind projects, including some already under construction, collapsing bipartisan support.
Last year brought other new federal and state actions that contributed to an overall sense of turbulence in the business climate. Some of these actions reflect predictable policy changes that have had surprising manifestations. Tightened immigration enforcement was expected, but the deportation of highly skilled and executive-level personnel that followed an immigration raid at Hyundai’s Georgia facility was surprising, particularly after a bilateral trade agreement with South Korea was reached. The President called for lower interest rates during his campaign, but his all-out war with the Federal Reserve’s Chairman and Board of Governors has shaken confidence in the implacable prudence of U.S. monetary policy. Executive side quests attacking universities, DEI programs, political enemies, and law firms raise concerns that the Administration has not brought a single-minded focus to the task of improving the economy. Meanwhile, states continue to assert their own independent authority to regulate business. The recent proliferation of state-extended producer responsibility and packaging laws is particularly confounding for consumer products manufacturers, as a patchwork of regulatory requirements takes shape.
All of these political and legal developments have contributed to a sense of unease, and 2026 offers only limited hope for firmer ground, at least with respect to trade issues. The question of the President’s authority to levy tariffs under the IEEPA will be settled early in the year, but that decision will produce its own uncertainty. If the tariffs are struck down, existing trade agreements may be jeopardized, the Administration will replace the IEEPA tariffs by using more established authority, and the U.S. will face an onslaught of tariff-refund cases. If the IEEPA tariffs are upheld, industry can expect the mercurial application of that authority to continue in hard-to-anticipate ways. Meanwhile, the most impactful trade agreement in U.S. history, the U.S.-Mexico-Canada Agreement, will enter into a renegotiation period that could reshape the North American economy for decades. Manufacturers and consumer products companies will once again need to demonstrate strategic flexibility to navigate the challenges of the coming year.
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