2026 manufacturing industry outlook: It’s going to be another tough year. Here’s what you can do.
Let’s get the bad news out of the way: 2026 will be another tough year for the manufacturing industry. Tariffs and economic uncertainty will continue to present challenges for manufacturers and inhibit growth.
But the next 12 months also won’t be a repeat of 2025. During what will be a slow year, you have an opportunity to focus on what you can control — like operational efficiency, data collection and sales — to come out the other side running a more capable, effective business.
Keep reading to learn more about the major trends that will shape manufacturing in 2026 and how you can meet the moment.
What are the key trends and challenges that will affect manufacturing in 2026?
In 2026, the industry outlook is volatile. Expect growth to be essentially flat, weighed down by uncertainty, tariffs and other trade challenges and an economy that is sluggish overall. Much also depends on the upcoming USMCA review in July of 2026, which could either boost the North American markets or handcuff them.
Here are some more details on what to watch for over the next 12 months:
- Weak economy: Over 90% of economic growth in the first half of 2025 was in the AI industry. Most other sectors, manufacturing included, are flat or dropping. It’s tough to project any significant change for manufacturing here in 2026, especially with interest rates remaining higher than average.
- Tariffs: The Trump administration’s tariff policy roiled the manufacturing world in 2025, a trend that will continue in 2026. While the Supreme Court is reviewing and may rule against the president’s tariff authority under the International Emergency Economic Powers Act (IEEPA), the White House is likely to react by reimposing tariffs under a different statute rather than withdrawing them entirely. Large manufacturers like General Motors are now planning for tariffs to be in place for at least the next decade.
- High costs: Due to tariffs, rising wages and other economic pressures, virtually every line item in manufacturers’ budgets has gone up. Around labor, specifically, many companies are still hiring like they’re in growth mode, despite the fact that growth isn’t actually happening. This is unsustainable.
- Limited capital investments: To be blunt, companies will be limited in terms of making capital investments over the next 12 months. The cost of goods, equipment and services will force manufacturers to carefully prioritize.
- Tax opportunities: The tax and budget bill that passed over the summer creates additional tax opportunities for manufacturing, specifically via domestic R&D expensing, 100% bonus depreciation and the new qualified production property tax incentive. Tax incentives can be an area for firms to recoup money lost elsewhere, although equipment that may qualify for an incentive is also likely to be more expensive due to tariffs.
- Technology and automation: Manufacturers should be looking to technology and automation to help solve some of their challenges. The question is, can they afford it? Middle-market firms exploring AI and automation tech are also often finding that they need to get their data in order first.
- USMCA review: This is the big dog to watch for. There have been rumblings that the White House may seek to negotiate separate deals with Mexico and Canada rather than pursue another trilateral agreement. Regardless of the structure, manufacturers are counting on an outcome that leads to reduced trade barriers across North America, as the opposite result would further suppress growth.
How can manufacturing adapt to meet the challenges facing the industry in 2026?
2026 won’t be all bad for manufacturing. In fact, it will also be a year of tremendous possibility — for firms that are willing to admit that business conditions have fundamentally changed and adapt to meet the new reality.
Here are some essential actions to consider as you enter 2026:
1. Figure out where you can take action
Manufacturing leaders were understandably cautious in 2025. But it’s time to get out of wait-and-see mode and into action.
There is so much going on in the world right now that is beyond your control. Inside your business, however, there is much that you can do.
Consider these three areas where you can make a big impact in 2026: operational efficiency, data readiness and sales. If you can run your business more efficiently, organize your data to draw more actionable insights and strengthen your sales process to generate more conversions, you can make a big dent in any financial challenges your business is currently facing as a result of broader trends.
Also think about where you need to adapt to meet changing conditions. If you’re struggling with flat or falling revenue, reevaluate how you’re handling cash. Get back to doing 13-week cash flows, accelerate accounts receivable and delay accounts payable where you can to get your business more grounded financially.
Consulting with an advisor can be huge here. An advisory firm can help you identify specific ways you can improve your systems and processes and work with your team to implement changes that will put you on stronger footing.
2. Assess your tax opportunities
Making the most of the tax opportunities that are available to you will be key to stabilizing financially. But is your current business strategy set up to account for the major 2025 changes to the tax code that will directly affect manufacturing?
Work with your tax advisor to consider how new or updated rules for Section 174 R&D expensing, bonus depreciation and qualified production property create opportunities to save money or make needed business investments more cost-effective. This is an area where you can generate major ROI: for example, spending $25,000 on tax advice could net 10 times that amount in savings.
3. Evaluate where tech upgrades make sense
You don’t need to upgrade your tech just because there’s a newer, shinier model available. In 2026, that may not be the best use of cash (or debt).
But you should evaluate how modern, cloud-based digital systems can help you run your business more efficiently and effectively. Think about tech from an ROI perspective. What are the specific business problems you face that better systems can help you overcome in a way that strengthens your performance and financials?
A lot of this involves simply getting your data in order and pulling together disconnected, disparate systems into a single unified source of truth. Better data makes it easier to understand how your business is performing, find problems or inefficiencies and make smarter financial projections to guide your decision-making.
Your business likely has all the information you need already. The problem is that your existing systems may not be talking to each other, which means you’ll have a much harder time understanding where you are and where you’re going.
Cybersecurity is another big area that can deliver ROI, too. Cyberattacks have become a major financial risk for businesses, with manufacturing seeing an uptick in ransomware attacks that can hold your systems hostage. Investing a little in cybersecurity can save you a lot more down the road.
4. Reassess your sales process
With industry revenues flat or falling, sales is one area where you really want to shine. A strong, smooth sales process can help you convert more of the opportunities you do get and avoid losing out to competitors.
You should also assess whether there are new verticals you can pursue. What new types of work can you do using your existing equipment and production facilities? This could allow your sales team to pursue a broader potential customer base.
Work with an advisor to evaluate your existing sales process and identify where and how you can improve. From a cost perspective, this evaluation will quickly pay for itself if you see an increasing in your closing rate.
5. Upskill your team
Finally, upskilling can help you to prepare your team to use the new digital, AI and automation tools that are only going to grow more deeply embedded into manufacturing in the coming years. And because talented team members want to grow and develop new skills, offering upskilling opportunities will also help you address labor retention problems.
Explore how new digital and AI tools can help you not just with training, but with retaining and transferring knowledge from team members nearing retirement to the next generation. This kind of knowledge transfer can help you preserve valuable institutional experience that might otherwise be lost.
Finally, consider how upskilling can directly result in new business. In some cases, like federal government contracts, you may also need to meet certain cybersecurity standards like the cybersecurity maturity model certification (CMMC) to have your bid considered, so giving your team the training needed to meet those requirements can directly impact your bottom line.
How Wipfli can help
We help manufacturers to strengthen financials, overcome business obstacles and thrive. Let’s talk about your goals and challenges for 2026 and map out a plan to achieve them. Start a conversation.
Let’s win 2026 together
