U.S. Manufacturers Stay Optimistic Despite Labor Shortages and Tariffs
U.S. manufacturers are maintaining a surprisingly optimistic outlook amid a turbulent economic environment shaped by inflation, shifting trade policies, supply chain disruptions, and persistent labor shortages, according to new survey data from Nationwide.
The April 2025 survey of 400 mid-sized manufacturing companies found that 80% expect their business performance to improve over the next 12 months. That optimism stands in contrast to national manufacturing indicators such as the May ISM Manufacturing Index, which fell for the third straight month, signaling continued softness in overall sector sentiment.
“While pressures are building, many manufacturers remain optimistic as they take initiative and steps to position for future growth,” said Erika Melander, head of the insurance company’s national manufacturing practice.
The study points to strategic efforts by manufacturers to navigate growing trade volatility. 64% of respondents said they’ve diversified their supplier base in response to tariff uncertainty. More than half (52%) reported frontloading inventory, and 48% have updated business continuity plans.
While 75% of manufacturers still rely on international suppliers, 35% said they’ve shifted toward finding more domestic suppliers, with another 50% considering similar changes. Despite the challenges, 64% believe tariffs could benefit their business within the next year. Still, more than 60% reported that tariffs are driving up raw material costs and compressing profit margins.
To offset those rising costs, 32% of manufacturers plan to pass most of the increases on to customers. Another 44% say they will absorb some of the burden while implementing moderate price adjustments.
Digital investment is emerging as a core strategy for many manufacturers. Inventory management systems are already in use at 91% of surveyed companies, while 83% have implemented Internet of Things (IoT) technologies. Artificial intelligence is also gaining traction: Half (49%) of manufacturers cited AI as the biggest business opportunity over the next year.
Companies are already realizing gains from AI, including improved operational efficiency (47%) and financial savings (44%). However, obstacles remain. Around 40% cited the cost of adoption, integration challenges, and lack of internal expertise as significant barriers. Nearly one-third also expressed concern that early-stage AI implementation could lead to product quality issues.
Cybersecurity has also emerged as a growing area of focus, with 30% of manufacturers naming it a top investment priority in the coming year.
While confidence in business performance is high, labor-related challenges remain the industry’s most persistent concern, according to the survey.
64% of manufacturers said they are struggling to attract and retain skilled employees—challenges they expect to continue for at least the next year. Workforce development issues were also top of mind: 37% of respondents cited talent attraction and retention as their biggest workforce concern, followed by the need for training and upskilling (34%) and employee productivity (29%).
A key concern is engaging the next generation of workers. Two-thirds of respondents said it is difficult to attract younger employees with the right skills, and that many younger people do not view manufacturing as a viable career path.
“Manufacturers who treat risk management as a strategic priority—not just a safety net—will be better equipped to weather volatility and sustain growth,” Melander said. “Aligning technology adoption, workforce development, and initiative-taking risk planning is critical in today’s environment.”
While economic pressures—ranging from inflation to interest rate uncertainty—persist, the findings suggest that mid-sized U.S. manufacturers are leaning into digital transformation and operational agility as they prepare for growth in an unpredictable landscape, according to Nationwide.
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